Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions —

Mr. Speaker: I remind hon. Members that brief supplementary questions enable me to reach far more questions on the Order Paper.

Oral Answers to Questions — INDUSTRY

National Enterprise Board

Mr. Dormand: asked the Secretary of State for Industry whether any guidelines have been given to the newly constituted National Enterprise Board.

The Secretary of State for Industry (Sir Keith Joseph): The existing guidelines will remain in force until the Industry Bill has been enacted. A draft of the revised guidelines reflecting the Bill's provisions and the new role of the NEB will be available to the House tomorrow.

Mr. Dormand: Is the Secretary of State aware of deep concern in the North-East now that it is being said that Inmos is not to locate one of its manufacturing units in that region? Does not that warrant intervention by the National Enterprise Board, particularly as it is also said that a second allocation will be made to Bristol, which is not a special development area?

Sir K. Joseph: That decision is for the company and the National Enterprise Board to make.

Mr. Adley: Does my right hon. Friend agree that the general guidelines should be for Her Majesty's Government to encourage private enterprise where it is willing and able to do the job?

Sir Keith Joseph: Yes, Sir.

Mr. Wrigglesworth: Will the Secretary of State confirm that the guidelines just mentioned will not preclude the possibility of the Northern region having a northern development agency, of the type pressed upon him by the northern group of Labour Members?

Sir K. Joseph: The guidelines will not preclude such a possibility, which will be considered on its merits.

Mr. John Silkin: Since, on Thursday, the Under-Secretary, the hon. Member for Basingstoke (Mr. Mitchell), told us in Committee that he would apologise if the guidelines were altered before they were published, and since at the same time the new board of the NEB proposes changes in those guidelines, what does the Secretary of State propose to do? Will he apologise or will he force the resignation of this board?

Sir K. Joseph: My hon. Friend offered to apologise if the guidelines were not available for presentation tomorrow and we adhere to the intention to publish the guidelines tomorrow. The National Enterprise Board has been consulted.

British Leyland

Mr. Hal Miller: asked the Secretary of State for Industry whether he has yet received the British Leyland corporate plan.

Mr. Adley: asked the Secretary of State for Industry if he has yet received any request from British Leyland for additional public funds; and if he expects to do so.

Mr. Renton: asked the Secretary of State for Industry when he proposes to make a statement to the House regarding the further financial requirements of British Leyland.

Sir Keith Joseph: I received the BL 1980 corporate plan on 5 December. The plan envisages public funding additional to that already provided to BL. I am considering the BL proposals and shall make a statement to the House as soon as possible.

Mr. Miller: Since it has been announced that imports represent 60 per cent. of the British car market, what considerations will guide my right hon. Friend


in his deliberations on the corporate plan?

Sir K. Joseph: The national interest.

Mr. Adley: In the light of my right hon. Friend's answer to my previous question, will he agree, as regards British Leyland, to facilitate purchase by the private sector of any manufacturing capacity at plants that the State cannot, or will not, run profitably?

Sir K. Joseph: I understand that British Leyland is ready to consider any proposition to purchase that makes commercial sense.

Mr. Renton: Is the Secretary of State aware that last week the management of British Leyland removed its franchise from a Norwich garage that is under new ownership and with which I am associated? Is he aware that the garage wished to increase its throughput of British Leyland cars from 20 to 500 a year but that British Leyland management labelled that garage as "too aggressive"? If that is the attitude of British Leyland management, will the Secretary of State assure us that no further taxpayers' funds go to British Leyland?

Sir K. Joseph: I was not aware of that, but my hon. Friend's question is entirely for the board of British Leyland. I am sure that members of that board will read what my hon. Friend has said.

Mr. Park: Does "the national interest" include the problem of the thousands of people in Coventry who are to be made redundant?

Sir K. Joseph: Yes, Sir, but it also includes the interests of the taxpayers.

Mr. Bright: Can my right hon. Friend tell the House when other motor manufacturers, such as Vauxhall, can expect fair competition from Leyland without the distorting effects of taxpayers' subsidies?

Sir K. Joseph: That is another factor in the considerations which the Government have to give.

Mr. Robert Atkins: Following my right hon. Friend's answers to the questions put to him by my hon. Friend the Member for Christchurch and Lymington (Mr. Adley), may I ask him to facilitate the sale of MG to those who might want to buy it?

Sir K. Joseph: I repeat that that is for the management of BL to consider. I understand that it has already had a meeting with the potential purchasers to discuss possibilities.

National Enterprise Board

Mr. Douglas: asked the Secretary of State for Industry if he will make a statement regarding progress in filling the remaining places on the National Enterprise Board.

Mr. Meacher: asked the Secretary of State for Industry if he has yet appointed any trade union members to the National Enterprise Board.

The Minister of State, Department of Industry (Mr. Adam Butler): Since his statement on 21 November, my right hon. Friend has appointed Mr. J. F. G. Emms of the Commercial Union Assurance Co. Ltd. to the board.
I regret that the TUC has felt unable to accept my right hon. Friend's invitation to suggest the names of senior trade unionists for consideration for appointment to the board; but the offer remains open and, I hope, will be taken up.

Mr. Douglas: Will the Minister concede that his right hon. Friend's actions have contributed severely to disharmony in industrial relations throughout the country and that he ought to abolish his doctrinaire approach to this board?

Mr. Butler: There is no question of a doctrinaire approach to this board. We have regretted the resignation of the previous board on masse, and the House has debated it. We hope that the trade union movement will now see fit to put forward names so that the unions can take part in harmonious co-operation of the kind to which the hon. Gentleman refers.

Mr. Gordon Wilson: Will the Minister consider appointing a member of the Irish Development Authority to the National Enterprise Board, since the former body is a thousand times more successful in attracting mobile manufacturing industry? On that score, will the hon. Gentleman also look at the incentives which are available from the Irish Government for the attraction of industry, with a view to upgrading the


incentives which are currently proving a failure here in the United Kingdom?

Mr. Butler: I was not aware that the hon. Gentleman represented Irish interests. Obviously if there are lessons to be learnt, I hope that they will be drawn.

Dr. John Cunningham: Does not the hon. Gentleman now regret his right hon. Friend's cavalier attitude to TUC nominees on the National Enterprise Board, and will it not be seen to be a grave error, when, in the future, this Government need the support of TUC members, and it is not likely to be forthcoming?

Mr. Butler: I do not think that there was any cavalier attitude in this. I know that the TUC feels that it has been treated shabbily. That is a matter for the opinion of its members. All that my right hon. Friend has done—and I have repeated it today—is say that the places on the board are open and that we hope very much that the TUC will take advantage of them shortly.

British Steel Corporation (Industry) Limited

Mr. Beaumont-Dark: asked the Secretary of State for Industry if he will issue a direction to the British Steel Corporation, pursuant to section 4(5)(a) of the Iron and Steel Act 1975, to wind up British Steel Corporation (Industry) Limited.

The Under-Secretary of State for Industry (Mr. Michael Marshall): No. Sir.

Mr. Beaumont-Dark: The answer is, of course, as I had expected. If an hon. Member wishes to ask questions about the nationalised industries, he has to indulge in subterfuge, which is regrettable. But may I say that I hope—

Mr. Speaker: Order. Let me point out two matters to the hon. Gentleman. First, he must ask a question. Secondly, he must keep his comments until a more appropriate time.

Mr. Beaumont-Dark: I was just about to put my question to my hon. Friend. Bearing in mind the mess that British Steel has made of its own industry, will my hon. Friend have talks with the chairman to make sure that he does not try to

rearrange the deckchairs of the "Titanic" by attempting to lure industry away from Birmingham to the rest of the country? Will my hon. Friend stop him from spending tens of thousands of pounds trying to persuade Birmingham industry to go elsewhere, when industry in terms of British Steel has failed? In the Midlands, we are tired of British Steel taking our industry to cover its own mistakes.

Mr. Marshall: I am well aware of my hon. Friend's concern to make sure that Birmingham and the West Midlands get their fair share of investment. However, I know he takes a balanced view of these matters, and I am sure that he will appreciate that this is a problem which is related to plant closures and that there are now no fewer than eight sites where BSC plant or land has been available as part of the closure arrangements. Having set the financial parameters for the British Steel Corporation, we must leave it to resolve the problems in the way that seems best to it.

Mr. Rost: Will the Government at least facilitate British Steel hiving off those plants that it no longer wishes to run to the private sector—if the private sector wishes to run them properly—while we still have an industry left with people to employ?

Mr. Marshall: I appreciate, of course, what my hon. Friend suggests. However, these are matters where at present it may be a case of the least said, soonest mended.

Mr. Homewood: Since the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) is so highly conversant with the private enterprise sector of the steel industry of the West Midlands, can we be sure that one of his colleagues will be raising the question shortly of Round Oak, the private enterprise company in the West Midlands which is in serious trouble?

Mr. Marshall: I note what the hon. Gentleman says.

Mr. Kenneth Carlisle: Does not my hon. Friend agree that British Steel can save jobs only if its fully competitive? Is not it being impeded in its efforts to become competitive by its inability to obtain cheaper supplies of coking coal? Will my hon. Friend assure the House


that the British Steel Corporation will be able to import these supplies of cheaper coking coal?

Mr. Marshall: My hon. Friend raises yet another argument which suggests that non-intervention is the best policy at present.

Mr. Allen McKay: Bearing in mind the problems of the British steel industry, the possibility of a national strike on 2 January and the troubles that steel-making at Sheffield is having due to the dismissal of a shop steward, does not the hon. Gentleman agree that it is time that we debated in this House what is happening to the steel industry?

Mr. Marshall: I am sure that many hon. Members will share that view.

Mr. Michael Brown: Recognising the present difficulties of the British Steel Corporation, when my hon. Friend refers to non-intervention in the case of coking coal will he accept that we have examples of intervention in other Common Market countries in support of their steel industries? Is it not therefore a great shame that the British Steel Corporation cannot receive similar energy supplies to assist the survival of the industry?

Mr. Marshall: My hon. Friend may want to think this through in the wider context. He will probably be one of the first to agree that it is better to move away from a war of subsidy than to go too fast down that path.

Mr. John Silkin: Cannot the hon. Gentleman understand that when he talks about non-intervention to his hon. Friend the Member for Lincoln (Mr. Carlisle), he is encouraging the import of German coking coal, for example, with 29 times the subsidy given to such coal in this country? If he does not want to subsidise British coking coal, why do not he and his right hon. and hon. Friends ensure that subsidised coking coal is not allowed to come into the country?

Mr. Marshall: This argument has been thrashed out many times. The right hon. Gentleman is aware that the subsidy argument cannot be related to only one aspect of this issue. It has to be moved on to a much wider basis, and in the view of the Government this is a matter for agreement within the Community.

National Enterprise Board

Mr. Radice: asked the Secretary of State for Industry when he will meet next the chairman of the National Enterprise Board.

Mr. Whitehead: asked the Secretary of State for Industry when he expects next to meet the board of the new National Enterprise Board.

Sir Keith Joseph: I meet Sir Arthur Knight quite often, and I shall meet the full board soon.

Mr. Radice: Will the right hon. Gentleman remind the chairman of the NEB about the board's regional responsibilities? Does not he agree that the best way to show that it is living up to those responsibilities would to locate the Inmos factory in a special development area?

Sir K. Joseph: I do not think that there is any need to remind Sir Arthur or the new board of regional responsibilities. The decision on Inmos is for them.

Mr. Whitehead: Will the right hon. Gentleman tell the NEB, when he meets it, that in no circumstances will he ever come to the House to say that the board is thinking of resigning before ascertaining whether it intends to do so? Will the right hon. Gentleman now apologise to the House for what he said about Rolls-Royce during the debate that we had on that subject?

Sir K. Joseph: I explained the position fully in the recent debate in the House.

Mr. Edward Lyons: In view of the horrifying and growing massive de-industrialisation of the British economy, does the right hon. Gentleman agree that this is a time for abandoning entrenched attitudes on all sides and for him to discuss with the chairman of the National Enterprise Board a series of selective interventions to shore up parts of British industry that we cannot afford to lose?

Sir K. Joseph: The process to which the hon. and learned Gentleman refers has been intensified over the years. That was so during the lifetime of the Labour Government, when the policy that he recommends was carried out in vain.

Dr. John Cunningham: Will the right hon. Gentleman comment on the press reports that the new chairman of the National Enterprise Board is apparently about to advise him that in the remaining few weeks of the financial year, and after the Industry Bill receives Royal Assent, it would be foolish in the extreme to flog off assets in five or six important British industries?

Sir K. Joseph: The hon. Gentleman made his point of view plain in the most recent sitting of the Industry Bill in Committee. I am sure that the chairman of the NEB will have read his remarks.

Small Businesses

Mr. Marlow: asked the Secretary of State for Industry what action he is taking to reduce the impact of high interest rates on small businesses.

The Under-Secretary of State for Industry (Mr. David Mitchell): The Government recognise that the high interest rates add to the difficulties faced by businesses of all sizes. But we must pursue our policies to control monetary growth if inflation is to be squeezed out of the economy. That is the most effective action we can take to assist small firms.

Mr. Marlow: Since Conservative Members believe that small businesses are the engine of future economic well-being, and as such businesses will be squeezed by the forthcoming world recession, and by their customers retaining cash because of high interest rates, will my hon. Friend be more positive? I am sure that many small businesses throughout the country will wish to hear a more realistic appraisal from the Government.

Mr. Mitchell: There is no greater destructor of small businesses than rampant inflation, the removal of which has to be our first priority.

Mr. Cryer: Is it not true that high interest rates are smashing small businesses? Is it not also true that the attitude of the Government towards large public and private enterprises, such as British Leyland, for example, will take its toll on small businesses? Does the hon. Gentleman accept that when the Government attack large enterprises they are, in turn, attacking many small businesses which supply components and services?

Mr. Mitchell: The future of British Leyland depends upon the management and workers. We fully recognise the implications for the smaller business community.

Mr. Bruce-Gardyne: Will my hon. Friend always treat advice from the hon. Member for Keighley (Mr. Cryer) with all the respect that it deserves? Is he aware that when the hon. Gentleman held the position my hon. Friend now occupies he was described as being about as suitable to look after small businesses as Jack the Ripper would have been to look after a nurses' home?

Mr. Mitchell: I shall not comment on that, save to say that the only piece of furniture that I inherited from the hon. Gentleman was a picture of a twisted railway line ending in a brick wall. I draw my own conclusions.

Mr. John Evans: Does the hon. Gentleman agree that unless the Government reduce interest rates quickly the only growth industry in Great Britain will be bankruptcy?

Mr. Mitchell: I am aware that the efforts of the Labour Government led to the highest rate of bankruptcy that has ever occurred in Britain's history. We recognise that the consequences of dealing with the problems of inflation, which we inherited, will be difficult for small businesses. We have taken that on board. Unless we squeeze inflation out of the economy we shall do immense damage to all businesses, large and small.

British Leyland

Mr. Eggar: asked the Secretary of State for Industry when he intends next to meet the senior management of British Leyland.

Sir Keith Joseph: I see members of BL's senior management as and when the need arises.

Mr. Eggar: When my right hon. Friend meets the senior management of British Leyland will he make it clear that it has no obligation to purchase high-price steel from the British Steel Corporation, and that it may be in its best interests, in view of recent developments, to enter into long-term supply contracts with Continental suppliers?

Sir K. Joseph: I am sure that the BL management will read what my hon. Friend says.

Mr. Stoddart: Has the right hon. Gentleman seen the figures published today showing the increased import penetration of foreign cars into Britain? Does he now realise that if British Leyland is to compete with foreign manufacturers it is necessary for it to have a large injection of capital so that it may produce the new models which will sell in Britain and on the export markets?

Sir K. Joseph: I have explained that that BL plan is now before me. I shall report to the House the Government's decision as soon as possible.

Mr. John H. Osborn: Will my right hon. Friend bear in mind that the car industry's output has decreased from nearly 2 million cars 10 years ago to barely 1 million this year? Will he also bear in mind that that is affecting both the private and public sectors in the steel industry because of a lack of orders from the domestic car industry? What chance does my right hon. Friend see of bringing more work to our steel industry?

Sir K. Joseph: Yes, Sir, I realise that. Many firms and industries are interdependent.

British Steel Corporation

Mr. Blackburn: asked the Secretary of State for Industry when he expects to meet the board of the British Steel Corporation.

Sir Keith Joseph: I have no plans at present to do so, but I meet the chairman and board members when necessary.

Mr. Blackburn: Will my right hon. Friend, as a matter of urgency, write to the board of the British Steel Corporation and commend the work that has been done by the staff side, trade unions and management at the Round Oak steelworks in my constituency? Will he also commend the manner in which 800 jobs are being shed to maintain steel-working on the site, where it has taken place for the past 200 years?

Sir K. Joseph: I am sure that all concerned will read the comments of my hon. Friend with gratification.

Mr. James Hamilton: When the right hon. Gentleman next speaks to the chairman of the British Steel Corporation will he refer him to the letter sent to him by the hon. Member for Both well asking that the Clydale works at Mossend get the multi-pass mill? Will he bear in mind that if the works does not get the mill it will mean the demise of Clydale within the next six years, which in turn will mean another 2,000 jobs lost in the steel industry?

Sir K. Joseph: I am sure that the chairman and the management of the British Steel Corporation take all such matters seriously into account.

Mr. Rost: Will my right hon. Friend seek an early meeting with the chairman of British Steel to ask him how much progress the corporation is making in cutting some of its bureaucratic, top-heavy management, and to ask whether it will seriously consider off-loading to the private sector some of the plants that it cannot run profitably?

Sir K. Joseph: I regret that I have so often to say to hon. Members on both sides of the House that a proposition is for the management of British Steel. Once again, I have to tell my hon. Friend that if British Steel is not already well aware of the argument that he is advancing, I am sure that it will be made so by his remarks today.

Mr. Barry Jones: Has the right hon. Gentleman heard from the board of the British Steel Corporation of the widespread resentment in the industry over the ruthless and ferocious way in which he is applying his financial policies?

Sir K. Joseph: The hon. Gentleman and the House must recognise that the market for steel has been much reduced, and that within that market competitiveness is the only way to preserve jobs and to be viable. The board of the corporation recognises that it is facing a falling market, and it is seeking to be competitive.

Mr. Michael Brown: I accept my right hon. Friend's desire to ensure that the target that he set the British Steel Corporation earlier this year is met, but does he recognise that, following the publication last week of the half-yearly figures,


it is clear that the corporation will not be able to meet the target within the time set? Does he accept that if we are to have a viable steel industry in future there will have to be more time for the corporation to meet his directive?

Sir K. Joseph: The Government are already planning to provide the corporation with no less than £450 million of the taxpayers' money for the next financial year. We adhere to the proposition that we shall not fund losses during the next financial year. The corporation has confirmed its intention to break even next year. It finds it essential to do so because the market has fallen so sharply.

Dr. Bray: Will the right hon. Gentleman say whether he proposes to allow BSC to default on the payment of wages and other bills after the end of March?

Sir K. Joseph: Some months ago I told the British Steel Corporation board that I did not expect it to get into a position in which it ran out of funds next year. It has had ample warning of the need so to arrange its affairs that the contingency foreseen by the hon. Gentleman does not occur.

Mr. Renton: Does my right hon. Friend remember the remark attributed to the previous chairman of the BSC, Sir Monty Finniston, that he could make all the steel needed in Britain, competitively, but with a work force of 50,000 men? Are not many of the troubles of the present chairman due to the insistence of the previous Labour Government in keeping overmanned marginal steelworks going because they were located in Labour constituencies?

Sir K. Joseph: I think that misplaced—be it kindness, or timidity—has, by preventing adjustment when the market was better, succeeded in forcing upon the British steel industry far sharper cuts than might have been necessary.

Mr. John Silkin: Does not the right hon. Gentleman realise that, if he were right in that, it would apply to the private sector of the steel industry, which is in just as much trouble as the public sector, if not worse? But is not the real reason the fact that competition from other countries, particularly in Europe, is coming in on a subsidised and unfair basis?

In the light of that, how can he possibly expect viability by March 1980?

Sir K. Joseph: I do not think that the right hon. Gentleman's main proposition is true.

Robots

Mrs. Renée Short: asked the Secretary of State for Industry if he will introduce incentives for British industry to adopt robots.

Mr. David Mitchell: It is important that British firms should consider urgently what benefits robotics may offer them and take an early interest where these are likely to be crucial, even in the longer term. Support of novel applications is possible through existing arrangements, for example the microprocessor applications project.

Mrs. Short: As that sounds a bit like misplaced timidity, if I may say so, may I ask whether the Minister is aware that we have had the need in this area for the past 15 years but that, as usual, those who want to develop robots have been deprived of resources? Is he further aware that our main competitor in this area—Germany—is investing greatly? What does he intend to do about it?

Mr. Mitchell: As I said to the hon. Lady, it is possible to support novel applications through existing arrangements, for example the microprocessor applications project. We shall, of course, help support and develop robotics in the United Kingdom where such support is essential and can be found within existing provisions.

Sir Anthony Meyer: Is my hon. Friend aware that of far greater potential benefit to the United Kingdom economy than the manufacture of silicon chips is the application of these devices to British industry? Is he satisfied in this connection that those British firms which are tailor-making equipment to provide for the automation of British industry, are showing the necessary ingenuity and flexibility?

Mr. Mitchell: My hon. Friend is absolutely right to draw attention to the benefits which come from the application rather than from the original main invention. We should like to see—and seek to create—an environment in which we


encourage British industry to take more advantage of new processes of this kind.

Mr. Edwin Wainwright: Will the Minister always keep his eyes to the future and to modernisation? Will he also bear in mind such schemes as that which has been brought into operation by Mr. Len Ferns, I think, in the North-West, who has decided to pay the income tax of his employees and has therefore cut out the squabbles and enmity that is created by employees having to pay income tax on their wages? Will he look into that scheme and see whether he can enlarge it?

Mr. Mitchell: I am grateful to the hon. Gentleman for drawing attention to that particular scheme. I visited the factory and saw for myself the dynamic effects it has had on the pace of the work of those employed there. There may well be wider applications, but the lesson from it, surely, is that lower tax is a major incentive and that we should not fail to take note of that.

European Community (Regional Development Fund)

Mr. Knox: asked the Secretary of State for Industry what is the total value of grants made towards projects in England by the European regional development fund since 1975.

Mr. David Mitchell: The sum of £146 million. This includes £58·5 million in respect of industrial projects and £87·5 million in respect of infrastructure projects.

Mr. Knox: Does my hon. Friend agree that these are beneficial to the United Kingdom and provide further evidence of the advantages that accrue to us through our membership of the Common Market? What steps are the Government taking at the Council of Ministers to develop the European regional development fund, as this would be greatly to the advantage of the United Kingdom?

Mr. Mitchell: My hon. Friend is right to draw attention to the benefits to the United Kingdom arising from this fund. The regional fund is one of the few parts of the Community budget to give us a modest net benefit and is one that is guaranteed because of fixed national quotas. As to further opportunities that

may come in the future, in view of the current state of flux I hope my hon. Friend agrees that that is another question.

Mrs. Dunwoody: Is not it true that if the regional fund is made larger we shall simply have a larger proportion to pay? Will the hon. Gentleman look at the whole machinery, which at the moment is simply being used for some parts of the infrastructure and not for industry at all?

Mr. Mitchell: It is perfectly true that, within the totality of the Common Market budget, there seems to be a lack of balance at present. We shall continue to pursue the United Kingdom interest in that connection.

Mr. Fletcher-Cooke: Will my hon. Friend consider moving away from the discredited doctrine of additionality in the distribution of these funds, particularly now that the areas in which they might be helpful are being reduced by Government policy?

Mr. Mitchell: I certainly note my hon. and learned Friend's point.

Mr. Flannery: Is not it a fact that the Minister can no longer take refuge in euphemisms about lack of balance? Are not we paying £1,000 million more than anybody else, although we are far behind in our gross national product? Is it not time that the Prime Minister fought it out and told the Europeans bluntly that if we do not get the money back we shall come out of the Common Market?

Mr. Mitchell: I am sorry that the hon. Gentleman was not in the House when the Prime Minister reported that she had been doing just that.

British Steel Corporation

Mr. Hardy: asked the Secretary of State for Industry what account of official or national support given to the steel industries in other countries he takes in his own consideration of the position of the British Steel Corporation.

Mr. Adam Butler: In setting the corporation the target of operating at a profit in 1980–81 my right hon. Friend had very much in mind the efforts being made by steel industries in other countries also to operate profitably.

Mr. Hardy: Is the Minister aware that British Steel Corporation's losses per ton are dissimilar and that, indeed, the position may be better than in other countries where the steel industries enjoy sustained support from their Governments, who are busily engaged in exporting their unemployment to this country? Will he not, in the national interest, ensure that his right hon. Friend curbs his excessive concern to slaughter British Steel Corporation's capacity, which is required and should be sustained for the longer term?

Mr. Butler: First, comparisons are very difficult to make. However, if the hon. Gentleman considers them, he will see that British Steel, in terms of losses per ton, is very much at the bottom of the European table. Nowhere, as far as I am aware, will he find any European Government or taxpayers who have put £3 billion into their industry over the past four years, as we have. Second, if he looks at the comparisons, he will see that, for the greater part, either the European steel industries are operating profitably, or are showing a break-even, or are expecting profits in the near future.

Mr. John H. Osborn: Will my hon. Friend discuss with Sir Charles Villiers his statistics released in the press last week showing that United States and European engineering and steel production increased over the past five years and that there was a dramatic decrease in Britain? Does he not agree that this trend in Britain must now be reversed after a disastrous five years?

Mr. Butler: One of the problems in the European situation, as my hon. Friend probably knows better than I do, has been the increase in capacity in some countries. The result today is, I believe, that the European steel industry as a whole operates at about 70 per cent. of capacity. That is one of our problems. The chairman of BSC made some thorough assessments. It is his view that the United Kingdom industry must bring capacity down in line with demand, which will mean a reduction of the order of 5 million tons per annum.

Mr. Anderson: Will the Minister acknowledge that the steel industry is not working in a textbook world of perfect competition? The Secretary of State should know what a Utopian world of

perfect competition is. Is he aware that, by insisting on rigid cash limits, he will cause catastrophic losses in many regions at a time when, by his industrial policy, he is removing the very weapons that can provide jobs?

Mr. Butler: The hon. Gentleman must realise that the reasons for the plans that the British Steel Corporation has announced in outline and is discussing with the unions are lack of demand and a weak market. Those matters are not directly related to the cash position.

Mr. Renton: Does my hon. Friend agree that there is a great paradox on this issue displayed in the attitude of the right hon. Member for Deptford (Mr. Silkin), in that while he is tremendously opposed to the Common Market, the greatest support for European industry in the past two years has come from an EEC initiative—the Davignon plan?

Mr. Butler: Indeed. The purpose of Ministers is to try to ensure the continuation of the Davignon proposals into next year.

Mr. Hooley: Does the Minister agree that the successive destruction of Scunthorpe, Llanwern and Port Talbot will destroy capacity in this country which can be replaced in future only by imports, which will do even more ferocious damage to the balance of payments than the Government have done so far?

Mr. Butler: Without commenting on the particular plants, I can only repeat that the assessment of BSC management is that there is no market for the steel. Unlike the Labour Party, I think that the British Steel Corporation tries to live in the land of reality. Because the market is weak, it sees the need to bring down capacity to meet it.

Mr. Blackburn: Did my hon. Friend gather from the recent debate on the steel industry that the salient feature was that sales equal production which equals employment? In view of the thousands of jobs lost in my constituency, can we convey to people how important sales are?

Mr. Butler: Sales will come about only through the British Steel Corporation being competitive, getting its manning in line with European manning and getting


its product up to the quality of its competitors. Then it will sell steel.

Dr. John Cunningham: Does the Minister of State deny that European steel producers are receiving larger subsidies than the British Steel Corporation—perhaps hidden in the coking coal subsidy? Does he also deny that the British Steel Corporation's losses per ton are smaller than many European steel producers? Will he confirm that we are likely to see the closure of steel-making capacity in this country which is more modern and efficient than that which is likely to remain open in the rest of Europe?

Mr. Butler: Certainly. I think that I have already acknowledged that some European companies and industries are subsidised. I am not aware that, over recent years and at present, they are subsidised to the extent of BSC. If the hon. Gentleman will table a question I shall be happy to send him the loss figures of European companies. I have the list here. British Steel Corporation's loss in the last year is higher than that of any other company in this list.

Industrial Investment

Mr. Canavan: asked the Secretary of State for Industry whether he is satisfied with the current level of industrial investment; and if he will make a statement.

Mr. David Mitchell: No. But the way in which many firms use existing investment is equally disappointing.

Mr. Canavan: Is the Minister aware that Scottish industry will be starved of investment because of the Government's decisions to cut the budget and powers of the Scottish Development Agency and to withdraw development area status from many places where unemployment is still too high? Does he realise that we need more, not less, public investment, especially since the ending of exchange controls will shift more private investment out of the country?

Mr. Mitchell: Questions concerning the budget for the Scottish Development Agency are matters for my right hon. Friend the Secretary of State for Scotland.

Mr. Emery: Does my hon. Friend accept that, with minimum lending rate

at 17 per cent. and, therefore, industrial borrowing 3 or 4 per cent. higher, there is an even greater need—if we are to get on top of inflation so that interest rates can come down—for the trade union movement to back Government policy in cutting public expenditure and not oppose it?

Mr. Mitchell: My hon. Friend is right. The low level of productivity and the consequent low level of sales in this country are caused by a number of circumstances, not least lack of incentives, inadequate management and restrictive practices, all of which have played their part.

Mr. Gordon Wilson: Will Conservative Members, who seem to have a balance-sheet mentality in relation to industry, accept that their policies have been entirely loss-making? In those circumstances, will the Minister give an assessment of how long this loss-making white elephant of a Government will continue?

Mr. Mitchell: The Government's first target of cutting inflation at its sources will be followed by a second one of helping the creation of many thousands more businesses, which will create sufficient wealth that, by the time of and after the next election, we shall have another Conservative Government?

Rolls-Royce Ltd.

Mr. Strang: asked the Secretary of State for Industry whether he has had a meeting with the board of Rolls-Royce Ltd. following his statement announcing the members of the National Enterprise Board.

Sir Keith Joseph: No, Sir.

Mr. Strang: Has not the Secretary of State's row with the National Enterprise Board distracted attention from the real financial problems facing Rolls-Royce? Will he give some kind of assurance that he will treat this major company in a high technology area with some sympathy and support and not with the ruthless abandon that seems to have been exhibited towards certain other major publicly owned companies?

Sir K. Joseph: I am sure that the present and future management of Rolls-Royce will make as great a success as


can conceivably be made of the triumphant increase in orders that the management and work force have achieved.

Mr. Bruce-Gardyne: Does my right hon. Friend agree that orders alone are not enough, if they are not profitable? Will he assure the House that his Department's financial objectives for Rolls-Royce will be no less stringent than those of the NEB—namely, the achievement of at least a 10 per cent. return on assets by 1981?

Sir K. Joseph: Yes, Sir.

Mr. Les Huckfield: Is the right hon. Gentleman aware that when Rolls-Royce was under the auspices of the NEB, as part of the NEB's guidelines, Rolls-Royce had a duty to promote industrial democracy—despite the political lock-out that it organised during the engineering industry dispute? Now that the right hon. Gentleman presumes to run, or to handle, Rolls-Royce directly from his Department, what kind of guidelines or advice on industrial relations will he give to the chairman of Rolls-Royce?

Sir K. Joseph: We have expressed our general desire that industrial relations shall be as good as possible. We do not think that edicts from the Government or fiats under the law will improve industrial relations. We note that the legal requirement on the NEB to impose industrial democracy was totally ineffective under the previous Labour Government.

Post Office (Industrial Democracy)

Mr. Les Huckfield: asked the Secretary of State for Industry whether he will make a statement on the continuation of the Post Office industry democracy experiment.

Mr. Adam Butler: The views of all interested parties are at present being considered. My right hon. Friend expects to make a statement shortly.

Mr. Huckfield: Is the hon. Gentleman aware that there is a great deal of suspicion that his Department is about to terminate this experiment? Is he also aware that there is a great deal of concern, because many in the trade union movement feel that it has been a valuable experiment? Will he give an undertaking that he will assure trade union members who

have been appointed to the Post Office Board that they have done valuable work and that, because of that work, this experiment will be continued?

Mr. Butler: First of all, I can assure the hon. Gentleman that I am well aware of the views on this subject, because I have consulted widely, I have spoken to the Post Office management, the trade union members on the board, other trade unionists, and others who are interested. I remind the hon. Gentleman that this arrangement was set up by agreement between the two parties concerned for an experimental period of two years. If there is no agreement between the two parties about its continuation, the experiment lapses.

Mr. John Evans: In view of the Secretary of State's most recent announcement that he does not believe that fiats from Government do anything to help industrial relations, will the Minister of State advise the House whether his right hon. Friend intends to vote against the Employment Bill due to be introduced next Monday?

Mr. Butler: I do not think that that is relevant to this question. The hon. Gentleman is disagreeing with his hon. Friend the Member for Nuneaton (Mr. Huckfield), who appears to be asking for intervention by the Minister concerned—myself or my right hon. Friend—over the continuation of this agreement. We are saying that this is a matter between the parties concerned. It is much better that experiments such as this continue by agreement and not by diktat.

Oral Answers to Questions — JURY VETTING

Mr. Dubs: asked the Attorney-General if he has concluded his consideration of the guidelines on jury vetting.

The Attorney-General (Sir Michael Havers): No, Sir. One aspect of the practice has been dealt with in the Divisional Court today. I shall consider the implications of this and then consult further with my right hon. and noble Friend the Lord Chancellor and my right hon. Friend the Home Secretary before reaching my own conclusions.

Mr. Dubs: Does not the Attorney-General consider that the best course


might be to abolish this dubious practice, rather than spend a lot of time considering how it might be perpetuated?

The Attorney-General: No, Sir.

Mr. Emery: Will my right hon. and learned Friend bear in mind approaches other than those that have been made from Left-wing organisations? Is he aware that there are many who believe that it is important that we should have a balanced and proper jury to consider trials, particularly political trials? Does he agree that there has certainly been a degree of success with jury vetting in the past? My right hon. and learned Friend should consider that as well as the opposition to it.

The Attorney-General: All these matters will be considered when I have discussions with my right hon. Friend.

Mr. English: Does not the right hon. and learned Gentleman realise that this would have been a good subject for discussion by a Select Committee, had it not been that the Lord Chancellor was frightened of appearing before Select Committees and persuaded the Cabinet that he and the right hon. and learned Gentleman should not do so? Is it not true that the Lord Chancellor, in spite of the fact that it is the Home Secretary's responsibility to deal with the criminal law, has been talking all over the country about matters which he is afraid to deal with before Select Committees of the House?

The Attorney-General: I know that this subject is the hon. Gentleman's pet hobby horse and that he never misses the chance to make the point. I reject utterly the assertion that my right hon. and noble Friend is in any way frightened of anything or anybody.

Mr. Grieve: Will my right hon. and learned Friend bear in mind, on the whole of this question, that quite apart from what may be proper in the case of ordinary criminal trials, it is inevitable that there will be trials from time to time involving the safety of the State in which some form of jury vetting is absolutely essential for the protection of society?

The Attorney-General: Yes. This is one of the matters that will have to be considered.

Mr. John Morris: Will the Attorney-General give an assurance to the House that, pending his further consideration of this important matter, there will be no further authorisation of jury vetting without the right hon. and learned Gentleman informing the House and placing a report on it in the Library?

The Attorney-General: No, Sir. What I can say is that there will be no further jury vetting, if it should prove necessary, except under my direct approval.

Several Hon. Members: rose—

Mr. Speaker: Order. This subject comes up later.

Oral Answers to Questions — OFFICIAL SECRETS ACTS

Mr. Christopher Price: asked the Attorney-General if he will now make a statement about his prosecution policy under the Official Secrets Acts.

The Attorney-General: In deciding in any case whether to give my consent to a prosecution I shall consider whether there is sufficient evidence to support a charge and whether it is in the public interest.

Mr. Price: May I congratulate the Attorney-General on his part in dropping the Protection of Official Information Bill in the wake of the Blunt affair? Is he aware that intimidation over the use of section 2, which all civil servants have to sign, is still a great inhibition upon civil servants opening up scandal and waste in Governments? When will the right hon. and learned Gentleman bring forward a Bill to abolish section 2 and introduce a freedom of information Bill on the lines of the Bill put forward by the hon. Member for Isle of Ely (Mr. Freud)?

The Attorney-General: I am not quite sure what the hon. Gentleman is saying about the restriction on civil servants. Their obligations and duties as to how they should deal with official documents are clear. It is a matter for my right hon. Friend to decide when, at what time and in what form, any Bill to replace the present Act should be produced.

Mr. Freud: If the Attorney-General does not intend to invoke a law that appears on the statute book is it not high time that it was revoked?

The Attorney-General: I have not said in any way that I shall not invoke a law that is on the statute book. I shall have to consider each case and decide whether, both upon the evidence and in the public interest, a prosecution should take place.

Mr. Archer: Does the Attorney-General appreciate that the Government have, at present, left this matter in mid-air? Can he give the House any idea of the Government's policy regarding the repeal of section 2?

The Attorney-General: As is known, the Bill was withdrawn from the other place, so section 2 still applies. In appropriate cases, when I am considering the public interest aspect, it will be open to me to take into account the recommendations of the Franks committee, the proposals made by successive Governments—because this goes back a long way—and public opinion on these proposals as expressed in Parliament and elsewhere.

Mr. Cryer: Is not the Lord Chancellor one of those who has expressed, from time to time, concern about what he described as an elective dictatorship—a view about which he seems rather mute these days? Is not one of the ways in which scrutiny can continue through more open government? Would it not be a matter of public concern if a civil servant spoke out freely about waste in government, for example? Does not this all point to the need for more open government? What, for goodness sake, will this Conservative Government do about that?

The Attorney-General: The question asked about my policy on prosecuting under the Official Secrets Acts. I have described that. How far a civil servant can go in disclosing matters about his ordinary day-to-day work would be a matter for me to consider. I should have to consider whether a disclosure was a breach of the Official Secrets Acts, bearing in mind all public interest aspects, some of which I have referred to today.

Oral Answers to Questions — DIRECTOR OF PUBLIC PROSECUTIONS

Mr. Canavan: asked the Attorney-General, when he expects next to meet the Director of Public Prosecutions.

The Attorney-General: Soon, Sir.

Mr. Canavan: Will the Attorney-General discuss, with the Director of Public Prosecutions, whether there is any time limits on the immunities granted to traitors such as Anthony Blunt and Ian Smith? In view of the fact that many law-abiding people in this country and elsewhere would be deeply offended if the likes of Ian Smith were allowed immunity from prosecution for the rest of their life, will the Attorney-General confirm the possibility of his being arrested and prosecuted for treasonable activities?

The Attorney-General: I can give no such confirmation. That is a matter for my right hon. and noble Friend the Secretary of State for Foreign and Commonwealth Affairs. I had hoped that it was made clear during the debate on the Blunt affair that, when a confession is obtained as a result of immunity being granted, that confession remains inadmissible against that person for all time. If there was no other evidence it would be quite impossible to prosecute.

Mr. Lawrence: Will my right hon. and learned Friend again discuss with the Director of Public Prosecutions the delays in our courts and the advantages which would be gained in speeding up the criminal process if, in summary trials, the prosecution was obliged to serve on the defence a copy of its evidence?

The Attorney-General: My hon. Friend knows that I am sympathetic to that course of action. It is a matter on which we are continuing our discussions. I hope to be able to reach some decision quite soon.

Mr. Edward Lyons: Will the Attorney-General congratulate the Director of Public Prosecutions on sending a full-time official from his Department to assist in the Operation Countryman inquiry to ensure that there is no undue delay in evaluating the legal consequences of the results? Will he also raise with the


Director the question why the headquarters of the inquiry have changed from Camber well to Godalming, in view of the disquieting press reports that security involving some police officers could not be guaranteed in the London area?

The Attorney-General: What amounts to lending an official from the office of the Director, to the Countryman inquiry was, I think, very sensible. I shall happily pass on the comments of the hon. and learned Gentleman. I hope that he made his second comment without having read the full statement by the assistant chief constable, Mr. Burt, who asserted in the clearest terms that suggestions that the Countryman investigations had been obstructed were completely without truth. That is what he said yesterday and it is in most newspapers today. I am satisfied that Mr. Burt is right about that.

Oral Answers to Questions — IRON AND STEEL TRADES CONFEDERATION

Mr. Homewood: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely:
the decision by the Iron and Steel Trades Confederation to call a national strike of its membership in the public sector from 2 January 1980.
I seek a debate because the Iron and Steel Trades Confederation has within its membership a far greater number of workers employed in the steel industry than any other trade union, and there is no doubt that the whole of the British Steel Corporation plants will close production the moment such a strike becomes effective.
The British Steel Corporation supplies 54 per cent. of the home market steel demand and a closure of its works would have an immediate and catastrophic effect on all steel-using industries, particularly shipbuilding, car manufacture and engineering. There is little doubt that the steel workers will get the sympathy of those unions concerned in the movement of imported steel in this country.
Many people believe that the BSC is already heading down the road of destroying the steel industry in this country. With less than two weeks to go before the

industry shuts down for the Christmas and New Year break I believe that the House should debate the matter immediately.

Mr. Speaker: The hon. Member for Kettering (Mr. Homewood) gave me notice this morning before 12 o'clock that he would seek leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that he believed should have urgent consideration, namely,
the decision by the Iron and Steel Trades Confederation to call a national strike of its membership in the public sector from 2 January 1980.
As the House knows, under Standing Order No. 9 I am directed to take into account the several factors set out in the Standing Order but to give no reasons for my decision. I listened with care to the hon. Member, but I have to rule that his submission does not fall within the provisions of the Standing Order. Therefore, I cannot submit his application to the House.

MR. GEORGE WILKINSON

Mr. Mark Hughes: On a point of order, Mr. Speaker. You will recall that on Thursday last, during business questions, I requested the Leader of the House to make arrangements for an early statement to be made, either in this House or in another place, on the death of a constituent of mine, Mr. George Wilkinson, who was then in prison in Walton, in Liverpool. As hon. Members will know, if one is informed of such an occurrence at 2.30 pm on a Thursday the opportunities to raise the matter are strictly limited. It is not possible to table a private notice question or to seek to move the Adjournment of the House under Standing Order No. 9.
Since I raised that matter, and the Leader of the House was kind enough to say that he fully understood my concern and would pass my request to his right hon. Friend, certain things have happened. First, the other place has not sat—either on Friday or today—so it has not been practicable for a statement to be made there by the Home Office Minister responsible for the prison service. Secondly, there has been a great deal of speculation


in the press, both nationally and, particularly, in the North-East.
I am now in the difficulty that, at 2.50 this afternoon, I was informed by the Liverpool coroner that he had opened a coroner's inquest. At about 3 o'clock, the inquest was adjourned.
I therefore ask, Mr. Speaker, not for a ruling today but for your consideration of the difficulty that faces an hon. Member in these circumstances. It would be improper for me to raise in the House the cause of death, because that is now under the auspices and control of the coroner; it is sub judice. But there are other matters relating to the death of this person—not as to the cause of death but as to the circumstances prior to the immediate cause of death—which are the proper concern of the coroner.
I ask for you ruling, Mr. Speaker, and the comments of the Leader of the House, as to how an hon. Member is to proceed, particularly on a Thursday, when he learns that a constituent has died in prison in circumstances that give rise to difficulty. I ask for your opinion and ruling on the question whether, over the next five weeks—the inquest has been adjourned till at least 16 January—I shall be inhibited from asking any question, not on the cause of death but on other matters, whether I shall be inhibited from applying for an Adjournment debate and whether the Home Office is inhibited from making a statement in the House, since the Leader of the House said that he would at least pass on my request in good faith to the Home Secretary.
What is the position of an hon. Member when an inquest has been opened at 2.50 pm, as this one has today, before the first opportunity for a statement to be made, a private notice question to be tabled, or any other facility available to a Back Bencher to be used? What can I do and what can the House do between now and 16 January?

The Chancellor of the Duchy of Lancaster and Leader of the House of Commons (Mr. Norman St. John-Stevas): Further to the point of order, Mr. Speaker. Before you give your ruling, perhaps I might say that, fulfilling what I told the hon. Member for Durham (Mr. Hughes), I passed his request immediately to my right hon. Friend the Home Secretary. These other events have supervened.

Mr. Speaker: I shall of course look into what the hon. Member for Durham (Mr. Hughes) has said and will communicate with him if there is any way in which I can help him. I shall give serious consideration to the matters that he has raised.

Later—

Mr. Heffer: Further to the point of order of my hon. Friend the Member for Durham (Mr. Hughes), Mr. Speaker. I should be grateful if on that matter you would also communicate with me. The unfortunate man was in Walton prison only for one night, which is why I have not raised the matter, but the issue involves my constituency and some of my constituents, and it is therefore important that I should be informed. I reiterate that the unfortunate man was in Walton prison for only one night. I do not believe that the prison officers who are my constituents were involved, but I should like to be kept informed.

Mr. Speaker: It would be preferable if I made my statement to the House briefly. Then the whole House will be in the picture.

NUCLEAR MISSILES (NATO MEETING)

Mr. Frank Allaun: On a point of order, Mr. Speaker. I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9—

Mr. Speaker: Order. The hon. Member has probably not had the message that I sent to him. He gave me notice at 12.50 pm, which was after the time when he should have given notice, since this matter was known last week and he could have given notice that he wished to move the Adjournment of the House. Therefore, he cannot do it today.

Mr. Allaun: Further to the point of order, Mr. Speaker. Since last Thursday, the Prime Minister of Holland has been to see the British Prime Minister and the American President—something that introduces, if I may say so, a new factor in the question of the 12 December meeting of NATO to discuss the siting of new nuclear missiles on British territory. Therefore, I ask that I be permitted to make my request for the Adjournment of


the House—not to argue the case but to give reasons why it is a matter of urgent importance and one of precision. I should like to do that.

Mr. Speaker: I should very much like to help the hon. Member for Salford, East (Mr. Allaun). I prefer to help hon. Members, but the House has given me instructions that where the facts are known before 12 o'clock applications for Adjournment debates must reach me before that time. To reveal circumstances that I do not normally reveal—last week I had privately to indicate to another hon. Member that he could not raise a matter that he wished to raise because he had not notified me by the proper time. If I start playing with the rules of the House in this way it will be difficult to know where to draw the line. The House has given me the rules, which it expects me to observe.

Mr. Cryer: Further to the point of order Mr. Speaker. The Secretary of State for Defence failed to come to the House on Thursday, the day after the meeting that has been widely canvassed on television, and that meeting has not been subject to democratic debate in this House, an omission that is unique among the European Powers concerned. I therefore give you notice, Mr. Speaker, that, if there is no statement I intend to raise the matter next Monday under the Standing Order No. 9 procedure.

Mr. Newens: Further to the point of order, Mr. Speaker. May we have guidance on how to raise the issue, in view of what you said to my hon. Friend the Member for Salford, East (Mr. Allaun)? If a Standing Order No. 9 application were made to you before the prescribed time, would that be in order? There are important issues at stake on the possible deployment of theatre nuclear weapons. May we have guidance on how we can raise the issue under the rules of procedure?

Mr. Speaker: I in no way underestimate the strength of feeling on the part of the hon. Member for Salford, East and hon. Members who support him in the matter. I am merely indicating that I have to observe the rules of the House. Had the notice come to me before 12 o'clock the hon. Member would certainly have

been called to seek the leave of the House under Standing Order No. 9.

Mr. Allaun: Further to my point of order, Mr. Speaker. If before 12 o'clock tomorrow morning I seek leave to move the Adjournment of the House, and particularly if there is a new development in the matter, will I be in order?

Mr. Speaker: I am not being unsympathetic when I say that I shall let the hon. Member know tomorrow, when we know whether there is a new factor in the issue.

BILL PRESENTED

TRADE DESCRIPTIONS

Mr. Martin Flannery, supported by Miss Joan Maynard and Mr. Frank Hooley, presented a Bill to extend the operation of section 1 of the Trade Descriptions Act 1972: And the same was read the First time; and ordered to be read a Second time upon Friday 14 December and to be printed. [Bill 102].

STATUTORY INSTRUMENTS

Mr. Speaker: With the leave of the House, I shall put together the questions on the motions relating to the four Statutory Instruments. I understand that the motion relating to dangerous substances is not moved.

Ordered,

That the draft Weights and Measures Act 1964 (Milk) Order 1979 be referred to a Standing Committee on Statutory Instruments, &c.

That the draft Weights and Measures Act 1963 (Solid Fuel) Order 1979 be referred to a Standing Committee on Statutory Instruments, &c.

That the draft Cinematograph Films (Distribution of Levy) (Amendment) Regulations 1979 be referred to a Standing Committee on Statutory Instruments, &c.

That the draft Cinematograph Films (Collection of Levy) (Amendment No. 7) Regulations 1979 be referred to a Standing Committee on Statutory Instruments &c.—[Mr. MacGregor.]

HYPNOTISM (No. 2) BILL

The following notice of motion stood upon the Order Paper in the name of Mr. David Crouch:

That the Hypnotism (No. 2) Bill be referred to a Second Reading Committee.

Hon. Members: Object.

Mr. Speaker: In accordance with the provisions of Standing Order No. 66, as amended on 31 October, the hon. Member for Canterbury (Mr. Crouch) may move his motion only with the leave of the House. Leave having been declined, the Question cannot be put.

Mr. Crouch: I am hypnotised.

Mr. Speaker: So am I.

THE EXECUTIVE AND PUBLIC BODIES

Mr. A. P. Costain: I beg to move,
That there should be a review of the status and working of nationalised industries so as to provide for more effective scrutiny of the working of government-appointed bodies and nationalised industries.
By sheer coincidence, it is almost nine years to the day since I had a similar good fortune in winning the ballot. On that occasion, because of the special significance in my constituency, I drew attention to the need to review international navigation regulations. Last month, His Royal Highness the Prince of Wales opened on the white cliffs of Dover the most up-to-date coastguard monitoring system in the British Isles, which is designed to minimise accidents in that congested part of the English Channel. I resist the temptation to suggest to the House that it was the debate that I then initiated that led to that structure being built and traffic lanes being obligatory in the English Channel. It has taken several giant tanker disasters and the pollution of our beaches to prove the need for such elementary precautions.
Today, my motion has wider implications, and, like the dangers at sea, the problems are well known but the solutions are not easy to quantify. Our democratic system depends on a realistic relationship between hon. Members and the Executive, and we need to review our position as well as that of the civil servants. That matter was brought home to me recently when I asked a newly elected hon. Member what his first reactions were following his introduction to the House. His comment that there was too much politics in the House gave me as much surprise as that experienced by the Verger of St. Paul's when an American tourist asked him whether the cathedral was open on Sundays.
Earlier in this century, Parliament controlled expediture by insisting that details of public expenditure be debated on the Floor of this House on Supply days. In recent years, these Supply days have become the instrument of the Opposition in order to raise political matters, the debate of which is more likely to affect the results of the next by-election than effectively


control Government expenditure, and that applies equally to all political parties.
Like many hon. Members, my earlier adult years were in industry, and I had the honour to be elected to the House at what is now classically called "middle age". Not unnaturally, therefore, I am inclined to relate this motion to the situation in industry.
The responsibilities of Secretaries of State, supported by their Ministers, are similar to those of the chairman of a public company. Bearing in mind that the number of staff in a Government Department can vary from over 250,000 in the Ministry of Defence to 1,300 in the Department of Industry, there is as wide a diversity in Government as we find in private industry. The Department of the Environment has a staff of 50,000, and only 31 United Kingdom firms and 11 nationalised industries have a larger labour force.
Let us compare these responsibilities. After a general election, a Minister is appointed to head a Department that is administered by a permanent secretary who the day before could have been faithfully carrying out the policy decisions of the previous Minister, whose policies may well be diametrically opposed to those of the new Minister.
The industrial comparison would probably be a liquidator taking over control of a company. When one compares the duties of the chairman of an international company with those of a Secretary of State of the Crown, it is not too difficult to appreciate the difference. A Minister is expected, within a week of his appointment, to be able to answer in the House of Commons the most searching questions on the work of his Department. If a questioner is not satisfied with the answer, the Minister can be compelled to reply to an Adjournment debate that might take place well after midnight.
It would be fascinating to see the reaction of the newly appointed chairman of a large industrial group if told that a shareholder was coming to see him at midnight to seek an explanation of the mistakes of his predecessor. We recently had an example of the Secretary of State for the Environment being obliged to give priority over all his responsibilities to explain that the House had been mis-

led because some folders were, in accordance with normal custom, tied together.
I maintain to the utmost that if a Minister misleads the House it should be obligatory on him to apologise to the House and correct the error. But there is, surely, a difference between a Minister's deliberately misleading the House on a major issue and giving an incorrect answer to a parliamentary question as a result of a clerical error. On the other hand, if the chairman of a hypothetical company had received 11 letters from the same shareholder and two replies had been inadvertently placed in the wrong envelope, is it likely that he would waste his time by attending a shareholders' meeting to explain the error? A Minister is expected to read and personally sign letters received by his Department from over 600 Members of Parliament who submit complaints and problems put to them by their constituents. He is expected to remember those replies when hon. Members meet him in the Lobby and wish to discuss problems with him. The chairman of a public company would delegate his responsibility in that regard to his public relations department.
It should also be remembered that a Minister, during the long Committee stage of any Bill that he is promoting, depends on the notes that his parliamentary draftsmen pass to him when he is replying to the Committee's criticism on clauses. These Committees can take two mornings a week over a considerable period. The equivalent in industry would be the chairman of a public company in industry wishing to alter the memorandum and articles of association. He would not contemplate doing so personally, but would delegate the matter to his legal department.

Mr. A. J. Beith: Does not the hon. Gentleman agree, though, that it is the very fact that a Minister has to take responsibility at the Dispatch Box for matters that have gone wrong, not as a result of his own failures but of those of his subordinates, that causes a Department to try to avoid similar mistakes happening again and to correct them when they do occur? Do we not receive many letters, as Members of Parliament, about bodies including, sometimes, private companies, in which this chain of responsibility does not exist?

Mr. Costain: I agree. If the hon. Gentleman will be patient, I shall quote one Liberal Minister who was up against the same problem in 1869. That was Mr. Ayrton, one of Mr. Gladstone's Ministers.
Is it any wonder, in view of these responsibilities, that the, day-to-day operation of a Government Department must, of necessity, be controlled by the Permanent Secretary? He is responsible for carrying out his Minister's policies. By tradition, a permanent secretary can argue against the policies. But once the Minister has laid down those policies, the permanent secretary is honour bound to implement them regardless of personal conviction. There is one safeguard. The permanent secretary can advise the Minister, in writing, of his disagreement with the policies. In that event, the Minister can order the permanent secretary, also in writing, to carry out his instructions in spite of any personal conviction.
In due course, these facts will be disclosed to the House of Commons and will be investigated by the Public Accounts Committee on a report by the Comptroller and Auditor General. I am glad to say that in the many years that I have been a member of the PAC this has never happened. Equally, the PAC, as far as I am aware, has always taken a bipartisan view on any matters brought before it.
The industrial equivalent would be for the chief executive of a company to resign or be dismissed. In industrial terms, the public sector lacks the discipline which the market place provides elsewhere. Yet the public and nationalised industries spend more money and deploy more staff than ever before.
I have therefore asked for this debate so that the House can assess its ability to monitor the workings of the various Departments. The House will recall that the Procedure Committee has spent a great deal of time on proposals to re-design our Select Committee structure. The House has agreed to those proposals in principle. Unless these Committees are detached from party politics, their deliberations could follow the pattern of our Supply day debates and deteriorate into electioneering party politics.
Now that these new Committees are tied to Departments, an excellent opportunity occurs for them to study the effects

of political decisions on the cost of the Departments and also the cost of capital projects that they have in mind. For example, if they were to study in detail the various reports of the PAC, they would observe that millions, almost hundreds of millions, of pounds have been wasted because Parliament has insisted upon the commencement of new projects before the plans have been properly completed.
There is a great temptation in times of financial stringency to disband architectural and engineering teams only to find, when the economic climate improves, that the blueprints are not ready for the capital works to start. For political expediency, the practical engineers' objections are often overruled. Examples that come readily to mind are the Liverpool teaching hospital, and roads and bridges, not forgetting the Humber bridge. Independent Committees should influence Cabinet decisions.
The powers that Parliament has conferred on these Committees are such that they will have to be used with the utmost discretion. I accept the decision that they should sit in public. However, it this is abused by hon. Members who seek to score political points, the whole system could be brought into contempt. One should reflect, for example, on the temptation before an Opposition Member with a marginal seat to put questions to a witness giving evidence to the Committee, in front of the press, in such a form that the most tentative proposal could appear to the press to be positive future Government policy.
I remind the House of the confusion that arose when tentative proposals were being considered by the EEC to standardise the quality of beer throughout the Community. The scare of Euro-beer was used by opponents of the Common Market.
The first report of the Selection Committee in appendix D on page 38, sets out a memorandum of guidance for officials appearing before Select Committees. It is not clear whether the memorandum is binding only on officials or is considered to be a guideline for the Committee's procedure as a whole. If the House could be given a decision on that matter today, it would be extremely—

Mr. Michael English: We can answer that clearly. We asked the Departments concerned to produce this memorandum. They did. It was printed as evidence to the Select Committee. It is not binding on the Procedure Committee or anyone in this Parliament. As far as I know, it has no legal force. It may be regarded as an instruction by one person in a hierarchy to his inferiors. That is its strength.

Mr. Costain: I am grateful to the hon. Gentleman. I know the amount of work he has put into this matter. He emphasises my point. Now is the time for decision. That decision should not be taken when there is a problem about whether Ministers should appear or whether certain Cabinet papers should be produced. I am submitting—the hon. Member for Nottingham, West (Mr. English) makes the point better—that the House at this early stage should get a decision. I am asking that the Government and the Cabinet should come to a decision. I do not, however, believe that the decision is in the giving of the Cabinet. It is this House that has the ultimate authority. It is much better to make a decision before trouble occurs, because bad cases make bad law.
One of the main reasons why I asked for this debate was that I hoped that we could settle these matters at an early stage, when we do not have prejudice. As far as I can see, only Mr. Speaker's prayers are answered.
It should be laid down that if a Minister refuses to produce papers and records the Committee should be empowered to take precedence over public business of the House. But the Opposition could use such a power wrongly to stop the business. The hon. Member for Nottingham, West, who remembers the case so well, has said that if a Minister does not produce the papers that are asked for, the business of the House should immediately be stopped. But that could be a wonderful arrangement for Opposition Members. Like me, the hon. Gentleman is a Chairman of Committees, and he knows the tactics that are being used now to delay Government business. The Committees should not be a method by which to do that.
As we now appoint Select Committees related to Government Departments, we should investigate the cost to each

Department of serving Parliament in general and the Committees in particular. Once we asked that certain data be produced, there is a tendency for the Department to continue to produce the information, whether or not it is of real value.
I am delighted to see that my right hon. and learned Friend the Member for Hexham (Mr. Rippon) is present. I had the privilege of being his Parliamentary Private Secretary for a number of years, and I remember how he used to go through the Department finding out whether information was needed.
To my amazement, when I carried out some research on this matter I found an interesting passage in a Hansard of 2 March 1869, 110 years ago. That was the time of the Gladstone Government. Mr. Ayrton, who was Mr. Gladstone's Secretary to the Treasury, admitted in replying to a Supply day debate that the charge for printing was very heavy. The report went on—the reference is col. 537:
but he must, at the same time, remind hon. Members that the expense…was one which they themselves…created…constantly asking for information which had to be printed and circulated. The only way to diminish the expenditure for printing was by a little forbearance on the part of the Members themselves. There was always an indisposition on the part of the Government to refuse Returns, because it looked as if there existed a desire to conceal something. The mere preparation of the Returns cost a good deal, and when they were laid upon the table hon. Members might with advantage consider whether any urgent necessity existed for printing and distributing them. His own conviction was that a great many hon. Members did not pass their time in reading these Returns.
I remember a Liberal hon. Member once saying that he read Hansard every day, but he has gone to the House of Lords now.
The report went on:
That day, for instance, they had received nearly 500 clearly printed pages of evidence relating to two Election Petitions. He should be curious to know by this day week whether any hon. Members had read these through.
I tried to find out today how many pages we had had last week, but one does not count the pages these days; one weighs them.
Mr. Ayrton was referring to the cost of £11,000 for the Irish Constabulary. The following passage shows that there is nothing new in the world:
With regard to the Irish Constabulary, it was not surprising, in the state in which Ireland


had been for some time past, that the force should have been brought up to its full complement, and, having to maintain this armed force, everybody, he thought, must agree that the best thing was to arm them in the best manner, so as to impress people with the conviction that they were efficient and capable of putting down disturbances.
It is an essential part of our democratic process that Members of Parliament should have the right to ask parliamentary questions. We have recently limited hon. Members to one oral question per Minister per day. The Committees might like to investigate what the saving would be if written questions were limited to, say, four per day on the same basis.
I know that my hon. Friend the Member for Rochester and Chatham (Mrs. Fenner) wants time to debate her own motion, so I shall not delay the House for much longer. However, before I conclude I should like to refer particularly to the position of the nationalised industries, because I think that they are the most serious and most difficult matter.
At present some of the nationalised industries are controlled by other nationalised bodies, such as the National Enterprise Board. As a result, some nationalised industries are controlled by a board which has on it directors who are probably competitors of other directors. The board has to report to a Department, which in turn must report to the Treasury. All that having been gone through, if the Treasury wants additional funds for the nationalised industries in question it has to go to a Cabinet committee. It is little wonder that the nationalised indusries are inefficient. The set-up is more like a modern Gilbert and Sullivan opera than an efficient business.
Only last month my right hon. Friend the Secretary of State for the Environment gave a talk to the British Institute of Management in which he said:
When I talk of being involved in management, I do not for a moment mean by that that politicians would or should become like managers in the industrial sense of the word, but only that all the information tools of management should be available to politicians and to civil servants.
The most important aspect of this approach is the relationship between Ministers and civil servants. We could do none of these things without them, and, indeed, one feels, I hope not over-optimistically, that what we are doing is as interesting to them as it is to us.
I hope that the members of the Committees will bear that in mind when they investigate Departments.

Mr. Ioan Evans: I congratulate the hon. Member for Folkestone and Hythe (Mr. Costain) on giving us this opportunity to examine the subject matter of his motion. It is important that the House should from time to time pay attention to the need for parliamentary control of the Executive and public bodies. The hon. Gentleman also brings in the nationalised industries. I want to deal with them later.
We should certainly think of parliamentary control of the Executive, because we have a Prime Minister who seems to be running the show. We wonder whether the Cabinet or the Prime Minister is in control. In order to try to restore parliamentary control over the Government and the Cabinet, we should perhaps begin to curb some of the Prime Minister's activities.
For scrutiny of Ministers and the Government we have created over a period of time nominated bodies, the so-called quangos. Hon. Members will agree that there needs to be better scrutiny, but at this very time the Government are doing away with the nominated bodies. I am not saying that the nominated bodies are perfect. There should be greater democratic accountability. One of their weaknesses is that they are appointed by the Ministers of the Departments to which they give advice. It has been a question of a Secretary of State's virtually appointing his advisers. There would be closer scrutiny and greater accountability if Parliament were to appoint the members of the nominated bodies who eventually advise the Government.
The Treasury, which is becoming economy mad, will find that the service given in the past by people who have served on nominated bodies for years will now be lost. Without the advice of these outside bodies Ministers will be increasingly dependent on their civil servants for advice. Judging by the way in which the Civil Service is under attack, it seems that in future there will be fewer civil servants to give advice. That creates problems of scrutiny.
The hon. Member for Folkestone and Hythe rightly referred to the setting up of the 14 new Select Committees. This is an experiment, and we look forward to working with them. They represent a


further check on the work of Government Departments. It is a pity that the hon. Member, who was fortunate in the ballot, did not table his motion earlier in the Session. We certainly need machinery for the examination and effective scrutiny of the nationalised industries.
The hon. Gentleman, when he referred to prayers, said that we sought to forget our polical prejudices, but we now have a Government who are doctrinaire and dogmatic in their approach to public ownership. I have never known a Government who have been more prejudiced in their approach to political issues than the present Government. Had the hon. Gentleman been able to table his motion earlier we might have prevented the mad rush into legislation by the Government.
This country is still recovering from the reorganisation of local government by the previous Conservative Government, yet the present Government are now coming back with another Bill to deal with the issue again. We shall have a Second Reading of the Local Government Planning and Land Bill in about a week. The Conservatives made a botch of local government reorganisation by rushing into it.
The present Secretary of State for Industry, when he was Secretary of State for Social Services made an absolute botch of reorganising the National Health Service. The present Government say that they must now do something to undo the harm done by the right hon. Gentleman when he was at that Department. Anyone who knows the National Health Service knows that the right hon. Gentleman increased the bureaucracy and the cost of the National Health Service.
What have we heard so far from the Government about the public industries? We have had the British Aerospace Bill, which will set up a company nominated by the Secretary of State. That will be followed by the subsequent dissolution of British Aerospace. That will be a backward step. That Bill is already before the House. There is the Civil Aviation Bill, which will provide for the reduction of the public dividend capital of British Airways. The corporation as we now know it, will be dissolved. That Bill is before the House as well and we will live to regret it.
The Competition Bill is presently in Standing Committee. The hon. Member for Folkestone and Hythe is the Chairman of that Committee. The Price Commission which has been abolished could have scrutinised the nationalised industries and looked at the prices being charged by public enterprises. The Government's belief in competition and market forces will, it is said, solve our inflation problem. Last year, inflation was in single figures. In the six months since this Government came to office inflation has almost doubled. Market forces are not working to bring down inflation.
The Industry Bill, which has had a Second Reading, provides for the transfer to private ownership of property held by the National Enterprise Board and by the Scottish and Welsh Development Agencies. Lastly, there is the Transport Bill, which will transfer the National Freight Corporation to private hands. These anti-public ownership Bills have been rushed through by the Government. It seems strange that at a time when we should be examining the role of public ownership we have witnessed an onslaught on the concept of public ownership by the Government. Their approach to the issue is dogmatic and doctrinaire.
The 1945 Labour Government brought the basic industries of this country into public ownership. Since then we have had Labour and Conservative Governments. During that period there was a consensus and a recognition that those basic industries—whichfailed under private enterprise before the war—should remain in public ownership. Our nationalised industries are playing a significant role in the British economy. They account for more than one-tenth of the gross domestic product and for one-fifth of the total fixed investment. Apart from the Government, who are a major employer, the four largest employers are the nationalised industries. They occupy a dominant position in the energy, steel, transport and communications industries.
About one-third of all plant and equipment bought by British industry is consumed by the public sector. The nationalised industries are not merely important in themselves; they are vital to the private sector and constitute in some areas, the sole domestic customer for several sectors


of British industry. During Question Time today there was talk of the British steel industry. If the steel industry collapses many industries will be affected. We can therefore see that the nationalised sector of industry plays an important role in the success, or otherwise, of both large and small private businesses.
Recently British Leyland failed under private enterprise. We should remember that when Rolls-Royce failed under private enterprise a previous Conservative Government—quite rightly—were determined, despite the talk of lame ducks, to keep it alive. Eventually, Rolls-Royce was brought under the control of the NEB. The same can be said of British Leyland. The question is, what are we to do about British Leyland, which is a major part of the car industry and must succeed in future? Many hundreds of thousands of people are employed in the motor car industry. The effect of the failure of a company like British Leyland on the steel, coal, energy and car component industries would be dramatic. The collapse of British Leyland would have a serious effect on private industry.
British nationalised industries are large organisations, with a vital economic influence. They have a social role as well. If we make international comparisons—the only real criteria in evaluating the success of their combined economic and social achievement—we find, if we are objective, that our nationalised industries have an excellent record.
A great many myths are put about, to a large extent by newspapers, about the nationalised industries. The newspapers, which are of course part of the private sector, take a jaundiced view of them. Those myths should be exposed, and I believe that the hon. Gentleman's motion gives us an opportunity to expose them.
It is said that nationalised industries always lose money. This is a myth propagated by the Conservatives. They do not lose money. In 1976 coal, energy, gas, the Post Office and the telecommunications industry, and British Airways were highly successful. They were making surpluses that benefited our people.
The truth of that could be further demonstrated if we had more recent figures. In the Post Office, for example, the surplus would be shown to

be even greater. It has been making a profit of about £360 million a year.

Mr. David Crouch: And who pays?

Mr. Evans: I shall come to that. If the Post Office were in the private sector there could be 360 millionaires, but its being in public ownership means that the benefit comes back to the public. As for the pricing of products and services, international comparisons can be made. On both the postal and the telecommunications side our Post Office compares very favourably.
Although there is a wide range of public enterprises that have been highly successful, there are nevertheless one or two exceptions. British Railways, for example, have been losing money. Again, however, the international picture shows that, whether in public ownership or under private enterprise, railways find it almost impossible to make a profit. Moreover, whether privately or publicly owned, much the same picture emerges, and where railways are privately owned they tend to be heavily subsidised by the Government.
There are many reasons for that state of affairs on the railways. The road haulage industry, for example, provides just the vehicles and the public provide the roads, the police and all the necessary facilities to make the industry function. The railways, on the other hand, provide not just the rolling stock but the network and the wherewithal that goes with it. It is for these economic reasons that the railways are not showing as big a financial surplus as many other public industries do.
There has been much discussion recently about the steel industry—we had it at Question Time again today—and we know that it has made a huge loss. But, again, the steel industry throughout the world, whether privately or publicly owned, is operating in conditions of world recession and in such circumstances is bound to suffer. The problem for our steel industry today is that the Government have set a break-even financial target to be met in the early months of next year, and everyone knows that it is impossible to achieve. At the Dispatch Box today, the Secretary of State for Industry said that he had given the British Steel Corporation its terms of reference,


that he would not finance it at all, that it must break even, and, if it does not come into surplus, it must carry on closing steel plants.
There has been reference to a catalogue of various parts of the steel industry. The Secretary of State went so far as to try a gibe against us on the Opposition Benches because we had kept the industry going. He seems to forget that although we are now in are cession there will be an economic upturn and it will be against Britain's interests if our steel industry is cut back so far that when the upturn comes we do not have an industry to produce the steel that both the private and the public sectors will require. Yet that will be the consequence of the crazy economic policies pursued by this Government, and we shall have to import steel from abroad.

Mr. Deputy Speaker (Mr. Richard Crawshaw): Order. The hon. Gentleman is discussing the merits or demerits of nationalised undertakings. The motion is directed to the question whether we should have a body to review these matters. I hope that the hon. Gentleman will direct his mind to that.

Mr. Evans: I was about to say, Mr. Deputy Speaker, that there is need for scrutiny but that we ought nevertheless to scrutinise the important role of these public industries and the way in which they are working beneficially for the whole community. If we had a Scrutiny Committee directly related to the nationalised industries we could show that some of the myths being put about today were without foundation.
Another myth about public ownership is that what was done by the Labour Government in their extensive programme of public ownership in 1945 is unique to the United Kingdom, that the phenomenon of public industries is to be found here but nowhere else. In fact, most leading industrialised countries now have a publicly owned sector. For example, Germany and France do not have the problems that we have in the motor car industry, but they had public ownership in that industry long before we did. Hon. Members on the Conservative Benches talk about Renault and make comparisons with British Leyland, but they forget that Renault was put into public

ownership in France before we even thought of public ownership in the motor car industry in Britain. Each country has evolved its own form of public ownership, and public enterprise has played an effective part in creating and maintaining economic prosperity.
It is interesting to note a comparison that is not always remembered in our debates on economic affairs. Apart from Switzerland, the three countries with the highest living standards in Europe are Austria, which has a Social Democratic Government and believes in public ownership, as the Labour Government have done, Sweden, which had a Social Democratic Government for 40 years, although that party is now in opposition, and Germany. Those are the three countries in Europe with the highest living standards, yet the Conservatives try to equate Socialism with low living standards. The truth is that Socialism can and does bring prosperity for the people.
Another myth is that nationalised industry is always some sort of monopoly—and I note here what was said by the hon. Member for Folkestone and Hythe about a committee to scrutinise nationalised industry. In fact, the nationalised industries are not pure monopolies. They themselves have competitors. For example, the coal industry has the public gas and electricity industries competing with it, as well as the private enterprise oil industry.
In other public industries—perhaps we could do with some scrutiny here—there is a pure monopoly. For example, on the Post Office—I revert here to the interjection by the hon. Member for Canterbury (Mr. Crouch)—a note of warning should be sounded. The Post Office has a complete monopoly in postal and telecommunication services in this country. I believe that we shall soon see the Departent of Industry bringing forward a Bill to carve up the Post Office, keeping the low-profit or non-profitable side in public ownership and hiving off the highly profitable telecommunications side to private enterprise. If that is done, it will do great damage to the people of this country.
One is bound to have a monopoly in certain sectors, and a good deal of the talk from the Tory Party on this subject is absolutely crazy. They talk about competition and imagine that alongside a


public Post Office system we could have a number of small firms delivering mail in certain areas. In fact, what the Post Office is able to do on the postal side is a social service, especially in the rural areas. In a sense, people in the large conurbations are subsidising others in the rural areas.
Most hon. Members on the Conservative Benches represent rural areas, not the large conurbations, and they should take due warning here. If the Government go through with their mad scheme to hive off telecommunications, the Post Office, especially in the rural areas, will be put in great financial difficulty.
I have thought it important to take this opportunity to defend public ownership. I believe that the present Government are approaching this whole subject in a doctrinaire and dogmatic fashion, adopting an approach that we never saw from the Churchill, Macmillan, Home or Heath Governments.
When she came to Cardiff, the Prime Minister said "I am a reactionary." When someone calls himself a reactionary, we on the Labour Benches tend to think that it is someting of an admission or confession. But the right hon. Lady clearly said "I am a reactionary" and now we have a Government who are putting forward reactionary policies.
I make an appeal to right hon. and hon. Members on the Government Benches. One of the good features of this Parliament is that we have already seen Back Benchers offering a warning to their own Government. The right hon. and learned Member for Hexham (Mr. Rippon) is in his place this afternoon, and he, for example, has given his Government a warning about the minimum lending rate. There have been other hon. Members who have realised that their Government are hell-bent towards the precipice and it is about time that someone said "Hold on; put on the brakes; think of what you are doing."
It is pleasing to find hon. Members asserting their rights as they should in this Chamber. Although when one's party is electetd to Government one expects to give it a great deal of support, when one sees that Government going completely off the rails it is not a friendly act to sit back and allow them just to

carry on without regard to the consequences.
Reverting to the specific terms of the motion, I agree that there should be greater scrutiny. I consider that the experiment with Select Committees offers one way, but I hope that the Government will not proceed with their plans to do away with the nominated bodies. Rather than abolish them the Government should make them more democratically accountable. Instead of Ministers nominating the members of such bodies, the membership should be appointed by Parliament. The bodies that operate in the regions might be appointed by a combination of the regional councillors and Members of Parliament.
These Committees have an important part to play in scrutinising the work of Government Departments. Nevertheless, the Government insist on abolishing nominated bodies as a means of securing petty economies. If the Government made a mistake over expenditure it could cost a great deal more than it costs to maintain and service the nominated bodies that are designed to keep an eye on public expenditure, many of the members of which accept no financial reward for the work.
The House of Commons must be vigilant. In their policies the Government are giving effect to their theories, which are that provided certain laws are passed all will again be well in Britain. However, in the six or seven months that the Government have been in power we have watched matters go from bad to worse to hopeless. In those circumstances it is essential for Members of Parliament to assert themselves. Many of us are profoundly disturbed at the Government's policies. We owe it to the country to tell the Government that enough is enough. I agree with the hon. Member for Folkestone and Hythe in this regard. We certainly need to scrutinise the work of the Executive and the Government far more, and I hope that Conservative Members will join us in pressing for that.

Mr. Geoffrey Rippon: We should be grateful to my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) for raising this important issue. The House should be spending a great


deal more time considering how best it can control the Executive and public bodies. My hon. Friend is right—and this applies to all Governments. There is a tendency to devote Supply days to general debates and not to considering how the real power of this House, which is to control public expenditure, should be exercised.
Contrary to what the hon. Member for Aberdare (Mr. Evans) seemed to think, this debate is not for the purpose of discussing the merits or otherwise of nationalised industries. I understand my hon. Friend's objective to be that the House should be able to exercise some control over how the nationalised industries are run. It may or may not be right for the Post Office to make a profit of £360 million a year if that profit goes to pay for other public services. But surely it is a matter in which the House should be concerned in seeking to balance the various requirements between the urban and rural areas—the need for a competitive service or for a social service.
We in this House have no control over the budgets or policies of the nationalised industries. I think that the late Aneurin Bevan said that one of the great necessities was to bring the nationalised industries into public ownership. Now, although we receive very courteous replies from the chairmen of the nationalised industries when we raise matters with them, it is difficult to discuss those issues in the House or to question Ministers about them. It would be a very good thing, therefore, if the budgets of the nationalised industries were brought before the House for approval at some stage. Supply days ought to mean what they used to mean—an opportunity for Parliament to express views about general matters of policy and administration.
I see no reason why Ministers should not present their departmental Estimates in advance of the incorporation of those Estimates in the Chancellor's total Budget proposals. Ministers could appear before a Committee of the House with their permanent secretaries, who are, after all, the accounting officers, and such other officials as they need, to say what they propose to do. Members of Parliament could then indicate whether they thought that more or less money should be spent on roads or houses, or say how proposed

cuts should be apportionated regionally between, for example, the North-East and the South-West. At the moment, so much of what happens is done by Treasury Ministers right across the board with insufficient regard for the way in which particular proposals will affect particular areas.
The hon. Member for Aberdare spoke about the Post Office and about balancing the needs of the urban and rural communities. The same applies to other aspects of public expenditure where the House ought to have a view about how much should be spent on deprived urban areas and about the corresponding need to support increasingly deprived rural areas which need sub-post offices, communications, bus services and other items.
It is ironic that the European Parliament, which has very little power, nevertheless has much more influence over the content of the EEC budget than this Parliament has over the content of our domestic Budget. While the European Parliament has very little power, it has considerable influence. However, this House, which nominally has all the power, has increasingly little influence.
My hon. Friend the Member for Scarborough (Mr. Shaw), who was the rapporteur for the budget in the European Parliament, will confirm that in that Parliament by far the greatest proportion of the time was spent discussing practical problems for the immediate future—that is, how the money should be spent. We do not do that here. We have vast general debates about whether we should pay less or more to the European Community, but we do not discuss, as we should, the size and shape of that budget or its structure. We do not do it in respect of the European budget or in respect of our domestic Budget. It is high time that Parliament gave more time to considering this matter.
All Governments are the same. They have a vested interest in keeping Parliament busy but relatively harmless: as many Members as possible should be moving like demented ants from one Committee to another, as many Bills as possible should be in Standing Committees, and everyone should be kept occupied and, as far as possible, prevented from discussing the real issues in time to enable Parliament to have any direct influence upon them.
It is to that situation that my hon. Friend's motion is designed to call attention. It is necessary for Parliament to start talking much more about the realities of life as they affect our constituents. Why are not more hon. Members attending the debate? It is a subject which should be of concern to all Members of Parliament. The answer is that we have so many debates with so many votes—most of them hopelessly upgraded—that, when the opportunity comes to take a little time off, Members are away to some other activity.
When thinking about how we can control the nationalised industries and the Executive, we must first consider how we can exercise control over departmental budgets. We should spend more time worrying about departmental budgets and less time on the Finance Bill, where we operate ex post facto.
The other necessity is to control the volume and content of legislation. I welcome the new Select Committees. I hope that they will serve a useful purpose. However, I regret that we do not operate a system under which we can consider legislation in draft. I have always thought that there is a good case for a form of pre-legislation process involving a Grand Committee. The Minister could present his draft Bill to all those hon. Members who are interested and, with the help of his officials, explain what it means and listen to comments. That might take one or two days.
Such a system will lead to fewer difficulties. It was a happy accident that the measure to amend the Official Secrets Act fell by the wayside. If there had been pre-legislative discussion, we should not have had so much trouble with the Immigration Bill. When the Community Land Bill was introduced, it was said that had there been some discussion on a draft measure the incredible would at least have been turned into the unacceptable. Some of the absurdities would have been ironed out. The Local Governments Planning and Land Bill contains twice as many pages of legislation as Parliament dealt in 1912. Some of it is quite good and some definitely not so good. It is impossible for Parliament to do justice to a Bill of that size and complexity during a Second Reading debate lasting only one or two days.
What happens? Hon. Members make their Second Reading speeches and criticise the measure. They have to be careful in case they are put on the Standing Committee—a mammoth task on a Bill of that size and complexity. The Bill goes to Committee and the junior Minister sees it through. Few amendments are made. We scratch the surface, but major amendments have to be reconsidered by the Cabinet body which processes such amendments. Once a Bill has received its Second Reading, it is difficult to exercise control over it.
If a Minister has faith in his Bill, he will be pleased to allow it to be examined in draft. After all, the Minister will have discussed such a Bill with almost every interested body in the country except the House of Commons. A Bill should be prepared for its Second Reading only after preliminary discussion among hon. Members. Our problem is that we do not have the opportunity to present in time our views on the departmental budgets or on legislation. We have either to say that we are rebels against a measure or be regarded as carping critics. Perhaps Opposition Members have no objection to Government Members being in that position.
This situation exists under all Governments. Many Governments wish that they had discussed a measure with their parliamentary colleagues more fully before launching into a policy which proves disastrous. An enormous amount of time is wasted on legislation such as the Community Land Act. That Act was unintelligible. It served the purposes neither of a Conservative Government nor a Socialist Government. It is to be repealed, and for that I am grateful. If we do not succeed in the urgent task of reasserting our authority over the processes of Government, more and more people will regard our debates as being less and less relevant to the needs of our generation.

Mr. Bob Cryer: It is important that Parliament should discuss the control of the Executive and public bodies. We are grateful to the hon. Member for Folkestone and Hythe (Mr. Costain) for raising this issue and giving


us the opportunity to discuss it on a Monday—when we are not exactly overcrowded with keen and eager hon. Members vying with each other to speak.
It is interesting that we should be talking about the control of the Executive on the day when my hon. Friend the Member for Salford, East (Mr. Allaun) attempted to secure a debate under Standing Order No. 9 on the visit of the Secretary of State for Defence to NATO to discuss the threat to impose cruise missiles on this country without any debate whatsoever in Parliament. If that is not a case of the Executive riding roughshod over the elected assembly, I do not know what is. The Government would have a majority on that issue because Conservatives go berserk and are besotted with the idea of spending more and more on death-dealing weapons.
However, there is a large body of opinion in the country, represented by a substantial body in the House, which has had no opportunity to criticise the Executive on its decision. All credit to the Dutch Parliament for taking that opportunity and for deciding not to put the world further into peril by enlarging our capacity to exterminate. That capacity is above our capacity to feed, clothe and shelter people. A subject of enormous magnitude has not been brought before the House. The Government should be ashamed, because they control the agenda for the House.
It is always said by Mr. Speaker that what is on the Order Paper is not a matter for him. Of course it is not. It is a matter for the Government, with the exception of one or two tiny concessions to the Opposition in the form of Supply days. However, the Opposition are always in a difficulty because so many matters compete for that time.
The Government have taken an initiative. The Secretary of State for Defence is to commit this country to increasing the number of these murderous weapons without the prior approval of the House. It is also shameful because the Secretary of State, who has never initiated a debate on that subject, appears on radio and television and makes statement without any public scrutiny. It is a disgrace that the Executive should trample roughshod over democracy in

this way. That is one example of why the issue under discussion is so important.
It is interesting to reflect on the days of the Labour Government when we had a bare majority for some of the time and were in minority for the rest. The present Lord Chancellor, Lord Hailsham, then talked about an elective dictatorship—not a phrase that comes often from his lips these days. If we were an elective dictatorship, working on a minority and calculating which of the minority parties would go into the Lobby with us, what are the present Government with a majority of 45? We now have a montrous dictatorship, but where is the Lord Chancellor's tender concern now?
The Secretary of State for Defence is rushing off and making commitments without our consent. When the Lord Chancellor made those remarks, the Government of the day were a different colour. That is why he is expressing no concern or criticism about public institutions today—and he should be the last person to do that, since he is a Member of the House of Lords.
Anxiety about control of the Executive is not expressed only when one is in Opposition. There is no doubt that when the Labour Party is in Government there is always a bubbling concern within the Labour Party to scrutinise the objectives, aims and aspirations of that Labour Government. I am sure that my right hon. Friend the Member for Ebbw Vale (Mr. Foot) will heartily agree with that. We do not simply become inert and supine supporters of every aspect of Labour Party policy because we are in office. There was genuine concern for democratic accountability during the period of Labour Government.
My hon. Friend the Member for Aberdare (Mr. Evans) and the hon. Member for Folkestone and Hythe mentioned nationalised industries, and Conservative hon. Members expressed continuing concern about them. One begins to suspect their motives—whether they are just attacking them, or whether they are genuinely concerned. Some Labour Party members are concerned because gigantic public corporations are not the ideal institutions that were envisaged when the Labour Party began talking about public ownership at the beginning of the century.
We accept that publicly owned bodies are often too bureaucratic and unfeeling, and that is felt particularly when, for example, the electricity board does not operate its code of practice and cuts off someone's supply. We care particularly when something goes wrong in a publicly owned industry, but it is the Opposition who have to accept the brickbats of criticism. We want to see more democratic accountability in those publicly owned bodies and greater sensitivity to present needs and issues by those bodies.
Although the hon. Member for Folkestone and Hythe has raised this issue, it is in direct contradistinction to the views of his Front Bench. As my hon. Friend the Member for Aberdare has pointed out, the Government are busy reducing the level of accountability. They are producing one of the most bizarre and cumbersome methods of disposing of the aerospace industry that one could imagine. One suspects that the Government's aim is to avoid hybridity and nothing else, after their lengthy use of that instrument when Labour was in office. They will hand over an industry that directly employs 68,000 people to a shell company, and then to a company that will be sold off to private enterprise. That will only reduce public accountability.
It comes particularly ill for the Conservative Government to talk about accountability when the legislation passed by the Labour Government invoked democratic involvement of workers in that industry. Of course, the Government are selling off chunks of public assets in other industries that the Labour Government acquired through fierce battles fought on the Floor of the House. In selling off those assets, they are reducing public accountability.
There have been rumours that the Post Office will be split up and that the profitable sections will be sold. Today there were questions about the experiment in democratic control of the Post Office, in which the Post Office unions had elected representatives on the Post Office board. That was an important experiment, but the Secretary of State for Industry has given no assurance that it will continue. He talks only of agreement between the parties, yet that was reached when the Labour Government were in office. Why cannot the Secretary of State

use his influence to encourage and retain that experiment rather than simply shrug it off?
The Secretary of State does not care about democratic accountability or the involvement of workers. He believes, in a touching way, in private enterprise, and that belief is beginning to contribute to our industrial decline. Anything that improves democratic accountability is ignored. Democratic control involves scrutiny, as that is one of the most important elements of accountability. The Government's philosophy is therefore to reduce democratic scrutiny by pulling out of industry wherever they can. That is strange and is in marked contrast to their views on trade unions. The Government feel that they must meddle in trade union matters as much as they can; and the Employment Bill serves that aim. Their philosophy is hardly consistent.
Government philosophy is about power in society. They want to hand power over to their friends in big business and to diminish the power of working men and women to organise and so equate the power of employers through the trade union movement. The Government want to shift power away from those who work for a livelihood towards the owners of capital. Democratic accountability is not in the forefront of their minds.
Derek Robinson claimed that there was collusion between Michael Edwardes of British Leyland and the Secretary of State for Industry with the intention of sacking him. It will be interesting to see whether the Treasury Minister will formally deny that. That particular convener of shop stewards, together with four others, issued a pamphlet taking a different view from that of the management. It was issued at the earliest possible moment after the management of British Leyland had made a proposal to cut back staff yet again. An open discussion of a different view and the publication of that view within a nationalised industry is surely part of accountability. The trade unions may be wrong, but at least they should have the right to put forward that view. Michael Edwardes and the management of British Leyland may be wrong and, as successive managements have made alterations and changes in their plans and decisions concerning market share and so on, it is conceivable that shop floor representatives are right


on this occasion. After all, Lucas Aerospace combined shop stewards committee was right although the management told it that defence contracts would provide plenty of employment. Three or four years later, the management turned round and announced redundancies.

Mr. Crouch: Only 71.

Mr. Cryer: The people on the shop floor were right at Lucas and they may be right at British Leyland as well. There was a ballot at British Leyland, but it was a hasty affair giving no opportunity for shop floor workers to express a contrary point of view. The management of British Leyland had a massive amount of media coverage. However, an opportunity should be given for a different point of view to be expressed, because that is what public accountability means. Where there is unanimity of view but no right for human aspirations to differ, or for human intelligence to produce a different view, one has the dead hand of conformity, and that rules out a clash that might lead to development.

Mr. Crouch: The hon. Member for Keighley (Mr. Cryer) knows nothing about it. He has never worked on a shop floor.

Mr. Cryer: The only way that improvements can be introduced is by challenging each other's thoughts and ideas. Ideas should never be assumed to be good in themselves.

Mr. Rippon: Does the hon. Gentleman agree that that is a very good reason for not having a closed shop?

Mr. Cryer: I might point out to the right hon. and learned Gentleman that the members of a closed shop are perfectly free to argue against the closed shop principle. Membership of a closed shop does not shut mouths. I do not want to be led too far down this road, although I am quite willing to argue about closed shops. I have never shrunk from such an argument. I believe that the 4 million people in closed shops derive enormous benefit from them. I know of no person in a closed shop who has been given a wage award and then told his manager that he did not like being in a closed shop and that he did not want the wage award. If a closed shop trade union organises improved working conditions, for example,

ventilation, I know of no employee who says "I do not want the ventilation. Give me back the dust and the asbestos as well, because I have not contributed to the trade union."
The suggestion that people inside a closed shop cannot argue against the idea is quite erroneous. They can argue, and they are free to persuade their fellow workers to break a closed shop if they so choose. However, the fact of the matter is—

Mr. Deputy Speaker: Order. I know that the hon. Gentleman was led down this path by an intervention, and I let him go on, but it is outside the terms of the debate. We are discussing parliamentary control of nationalised undertakings.

Mr. Cryer: I am grateful to you, Mr. Deputy Speaker, for drawing my attention to that. However, I want to emphasise to you that I am quite willing to argue about closed shops at any time and at any length.
The closed shop issue is not directly relevant, but the issue of the trade unions scrutinising the industries in which they work, including the nationalised industries, provides an important element of accountability. This argument sprang from my contention that it is the right of workers, organised in trade unions or not, to produce differing points of view because that state of affairs in itself provides an element of accountability in a public body. To victimise workers who express points of view of that kind is to diminish the role of the trade unions and to exalt the rights of management. That is a recipe for industrial conflict and disaster.
One of the most important areas of democratic accountability is created by electing people who have some sort of electorate to whom to report and some sort of relationship with them. In my view, we should try to avoid appointees at all costs, because they exalt the power of patronage which I oppose. We have managed to have a number of elections this year. We had a general election and local government elections on the same day, which many people thought was quite beyond the wit of the people. We also managed to have a Euro election, though it did not meet with much enthusiasm. We managed to have three elections. Why cannot we have people


elected to public bodies on the same day and in the same polling booths as those used for local government elections? Why should we have people appointed uniformly to area health authorities, for example? Why cannot we have people elected to the local area bodies of nationalised industries such as the Yorkshire electricity board or the North-Eastern gas board? Wy do not we have people elected to such bodies at the same time as local government representatives?
If we introduced such a requirement, people would have to make a case and put forward what they considered to be their element of accountability. There is no reason why we should not extend democracy to include some of the public bodies which operate in a very remote way. I am not blaming those who work on these public bodies. Often they do so with the greatest of good will and the strongest integrity. But the fact remains that the people in public life who spring strongly to mind are not members of area health authorities, or of the gas or electricity consumers' council. By and large, they are pretty obscure, and I should have thought that electing at least a proportion of the members of these bodies—and in my view it should be the majority of them—would exalt their position in the public mind and make them more readily accessible and accountable.
No doubt you will recall, Mr. Deputy Speaker, that two or three years ago I introduced a Ten-Minute Bill with the shocking idea of electing the boards of the nationalised industries from amongst the employees of the industries, with provision for people to be elected by consumer organisations, local government and so on, in order to provide an outside element on those boards. At the time, I argued that the pressure of work on many appointees to the boards of nationalised industries seemed to be so great that they could not possibly carry out all their duties.
This is one of the wonders of the world. We have a group of people who are appointed by Ministers. Those people are listed in an office somewhere in Whitehall by civil servants. It is a list of the great and the good. No one knows how they get on to the list, but they are the people who are publicly accountable for the bodies to which they are appointed.

People who write in may or may not get on to the list. Civil servants produce the list and put it before the Minister, and the Minister makes the choice. It is hardly a very wide choice.
I suggested that the boards should be elected mainly from amongst the work-people in the industries, with an outside element to stop the narrowness of syndicalism. I regret to have to remind the House that my effort to introduce a greater degree of workers' involvement and participation, a sense of belonging to those industries and a greater degree of public accountability was rejected by the House. The opposition to it was led by Mr. Teddy Taylor, who said that it was a terrible idea to have people elected to public bodies. Presumably he wanted more appointees. We want generally to move away from appointees. The present system puts too much power into too few hands.
If Members of Parliament are concerned about the accountability of public bodies to this House, I endorse that concern. When we began nationalisation during the 1945–50 period, we actually reduced the amount of accountability of the nationalised industries to this House. The result was that we could not, for example, ask about the closure of Little Witterington station, but we could ask about the directions of general policy. I think that hon. Members should have the right to ask about the closure of a sub-post office, a railway station or a goods siding. That is an important element of accountability, and the publicly owned industries should be subject to accountability here in this House. I distinguish that need and that right of Members of Parliament from a simple device being used to attack the nationalised industries as a matter of principle. In my view, accountability in this House is extremely important.
One of the concerns that we all express occurs at that moment in the Table Office when we attempt to table questions only to be told "This is a matter for the internal working of the Government, and you cannot ask questions about that." I object to that. We need to push back the barriers so that we can ask more parliamentary questions and not fewer. The relationship of the Government to the nationalised industries needs to be made as open as possible.
I know that I must not discuss the deliberations of the Standing Committee which is considering the British Aerospace Bill, but I have asked what will be the position of hon. Members in the future. The Government are narrowing that area of questions and not widening it as the Opposition would wish.
The motion suggests a review body. I am not quite sure what would be achieved by it. Parliament is a continuing review body with an element of accountability. If there is more power to Parliament's elbow, so much the better. But I must point out that, if the desire is simply to attack the nationalised indutries, the Opposition can counter by saying that we should have a review body for private industry. There have not been any of the scandals in the nationalised sector such as those which have occurred in Lonrho, Peachey, Hilton Haulage, London and Counties and all the rest, resulting in massive reports following investigations by the Department of Trade which have been debated only as the result of the initiative of my right hon. and hon. Friends and myself.
On previous occasions I have referred in the House to magistrates and their selection. I believe that they should be publicly accountable. They are accountable through the Lord Chancellor, but one of the problems of being in this place is that the Lord Chancellor does not stand before us and is not directly accountable. I have pleaded for the abolition of the secrecy surrounding the selection of magistrates by secret committees. I have asked the Attorney-General to publish the lists and the criteria by which magistrates are selected.
I accept that that is not the main thrust of the motion, but it refers to public bodies, and the committees that select magistrates are public. That selection system illustrates one feature of our public life that is too universal and too powerful—namely, the secrecy of the British system of government. It is unnecessary. Secrecy is too often used by the frightened as a means of stalling the genuine inquirer. It discourages confidence in government.
The Airedale trunk road inquiry, which will affect my constituency, is soon to be started. The original inquiry was stop-

ped by a large, organised protest led by Mr. John Tyme. The protect was given substance because the protestors thought that the machinery of government was a conspiracy to extend motorway building without public accountability. One of their arguments was that Parliament had not sufficiently scrutinised the motorway building programme over the years. I disagreed with that argument, but the result of bringing the inquiry to a halt is that new and improved methods of inquiry procedure have been instituted. As a result of the actions of the Labour Government, more information is provided for motorway inquiry procedures generally, and for objectors especially. There is now a better balance. Mr. and Mrs. Smith of Acacia Avenue who want to challenge the might of a Government Department, which is often a daunting task, are now in a better position to do so.
That sort of challenge of the workings of the Department of the Environment would not have been necessary if the workings and the machinery of government had been more open. We are fed with a series of leaks from the Department of the Environment. For example, there was the leak that a civil servant was preparing to produce an inquiry that would manipulate evidence about the damage to our roads caused by juggernauts so that new juggernauts would become acceptable. Leaks of that sort sap public confidence in our public bodies, in the operation of the Executive, and in the operation of the Government.
Why cannot we move to a more open system of government? I recognise that there are some areas of the work of the Home Office, of the work of the Ministry of Defence, and in some areas of commercial confidence in the Department of Industry, where revelation would restult in great damage being done. For example, the Department of Industry may have information that a firm is heading for a collapse. However, there is a vast area of Government activity that could and should be open to public scrutiny. Position papers are thrust so eagerly before Ministers by civil servants. They could be published to enable us to have a continuing dialogue.
In the Labour Party there is a dialogue. There is a bubbling of ideas. We put forward ideas that we think will improve the system of government and halt the


reckless indifference shown by the present Government to Britain's economic performance. However, when the Labour Party takes office the barrier of the Official Secrets Act comes down. There is felt immediately a sense of isolation and a feeling of suspicion. There is even a barrier between the minority in the majority party and the majority of the majority party. We know that about 100 Members are chosen to become Ministers. They have the gilded touch of patronage on their shoulder. No doubt the Financial Secretary was waiting by the telephone after the result of the general election had been announced. No doubt his telephone rang, he picked up the receiver, and he heard his leader say "You are chosen." Immediately he has access to confidential documents.
What is the position of the rest of the Conservative Party? Are they concerned about discussing issues with the Financial Secretary, or do they remain in isolation? In the Labour Party we want to maintain and improve the dialogue between Labour Governments and Labour Back Benchers so that secrecy is pushed to one side in all the areas where that is possible. That is an important element of accountability.

Mr. Costain: In the Conservative Party there is always access to Ministers. Ministers attend committee meetings and we question them. They listen to us and often they alter their opinion having listened to the views of Conservative Back Benchers. The hon. Gentleman is on the wrong tack if he is suggesting that secrecy prevails in the Conservative Party when a Conservative Government are in office.

Mr. Cryer: That is not quite true. About three years ago the Conservatives produced a document in which it was argued that there should be more open government and more participation by Back Benchers. Although the hon. Member for Folkestone and Hythe may not be subject to that strand of opinion, I judge that there is such a strand within the Conseravtive Party that argues for more openness in government. My hon. Friend the Member for Oldham, West (Mr. Meacher) has a Ten-Minute Bill the purpose of which is to obtain more information. It has been given support by Labour and Conservative Members. I

contend that in both parties it is argued that there should be more openness in government.
It is relevant to consider the power of the Civil Service. The majority of civil servants work diligently and carry out important public services. When I talk about civil servants, I am talking not about those who are in Department of Health and Social Security offices dealing with supplementary benefit payments, who exercise great tact and skill in so doing, nor of those who are in charge of employment offices who have to argue about unemployment benefit. I direct my remarks to a group that is mostly Oxbridge and mostly public school educated. I refer to senior civil servants who have access to Ministers. Many of them work along strict and narrow lines laid down by the general rules of conduct in the Civil Service. However, because it is all secret we cannot know with certainty whether they are exercising their tact and discretion neutrally or partially in a political sense.
Will we ever know, for example, what the weekly meeting of permanent secretaries is about? Is it an inner government who are not publicly accountable and who are manipulating the elected Government? Will we ever know the machinery of official meetings that parallel the machinery of the Cabinet committees? That, again, we are not supposed to know about. That is one of the many absurdities. We do not know about the machinery of government that leads to decisions being made.
Against that background of secrecy, it is not surprising that there is a degree of cynicism and that criticism is made of the operation of public bodies. I have already mentioned the ways in which appointments are made. When I was a Minister I called in certain civil servants to discuss where the names came from of those who were selected for various appointments. The discussion continued for almost two hours. I was not able to get from them how the lists were compiled. It is felt outside this place that there is an inner government that is not always working in the interests of the public as a whole. We shall not have full accountability until we have more open government. It is the Labour Party's policy to place the justification for secrecy on the institutions so that they


have to argue against the right to know and to provide reasons why information should not be revealed.
The Swedish constitution has existed since the eighteenth century, yet civilisation in Sweden has not come to a grinding halt because there is open government.
Hon. Members on both sides speak about this Chamber constituting an element of accountability. However, the difficulty about secrecy in government, when the leader of the governing party is able to choose the whole Government, is the power of patronage. This is a real, important and persuasive element. I refer to the word in the ear of a Member who is particularly vigilant—"Do not forget, old chap", it could be argued "that your career will come to a halt. There will be no ministerial post for you if you keep raising these awkward questions." That is a real element within Parliament. We must move on to open government. That will happen only in the Labour Party because the Conservative accept hierarchy. They accept one ayatollah on their side who makes all the appointments without challenge.
The Opposition are more democratic. [HON. MEMBERS: "Oh."] That is absolutely right. The arguments going on among members of the Labour Party are about accountability. We want to elect the Cabinet so that the elected Government of the day have an element of accountability to the rank and file of the Parliamentary Labour Party, so that the power of patronage, which is deeply felt and resented, may in some cases diminish and the search for information in Parliament may continue.
No constituency Labour Party or trade union would be run in the way that the Government are run. When the Labour Party takes office, its members follow the Tory rules. It is the Tory system to have a leader who makes all the appointments. However, that is not the system of a democratic Labour Party.
I have covered a number of items. I do not want to prolong unduly the points about the scrutiny of public bodies. However, this is an important matter.
I do not think that we shall be able to exercise the proper degree of choice in government, in the regulation of public

bodies or in the decision-making of public bodies as long as we remain inside the Common Market. We must develop alternatives to the membership of the Common Market. The power of Brussels is real. We have seen the power of Parliament shifted, not entirely but to a marked degree, over to Brussels. The Government cannot introduce new regional aids, for instance, to help a publicly owned industry, without obtaining consent from the Common Market. We cannot change our legislation, in many aspects, without obtaining approval from the Common Market. Nor can we regulate the trade of a publicly owned body such as the British Steel Corporation, which is suffering at the moment. We cannot make decisions about regulating steel imports without going to the Common Market. British Leyland cannot regulate the position of the flow of imports of cars into this country without, of course, going to the Government and without the Government going to the Common Market Commission. Our accountability and our system are limited by our membership of the Common Market.
The right hon. and learned Member for Hexham (Mr. Rippon) mentioned the European Parliament as being influential. In fact, the European Parliament is not influential. It is an empty talking shop. That was very much recognised by the electorate.

Mr. Deputy Speaker: I have listened carefully to the hon. Gentleman. I thought of intervening once or twice. He is now outside the subject of the debate. He was all right until a few moments ago. We do not want a general debate on the Common Market.

Mr. Cryer: The subject of the working of the nationalised industries is contained in the motion. The
more effective scrutiny…of government-appointed bodies and nationalised industries
is blurred by our membership of the Common Market. The right hon. and learned Member for Hexham raised the question of the European Parliament as a parallel. He said that the European Parliament exercised scrutiny of the EEC. In my view, it does not. That indifference by the British people and their poor understanding of the realities were reflected in the low European Parliament poll.
To sum up, we need more open government, less secrecy, more democratic accountability and more elections to provide properly accountable scrutiny.

Mr. David Crouch: The hon. Member for Keighley (Mr. Cryer) is like the curate's egg. He is good in parts, but I must say to him that in parts he is very poor indeed and that in other parts he is rank bad. I had some sympathy with the hon. Gentleman before he digressed to Europe and the Common Market. He is not insignificant. He is worthy of sitting on the Front Bench below the Gangway. At least he was a Minister and was nominated by the Prime Minister of the day to take office, which he held with responsibility. Allhon. Members were surprised that he held his office with such responsibility—as he is such a person. However, he is not just such a person who sits below the Gangway and never takes responsibility. He did take responsibility. He still speaks with some responsibility. That is what I am concerned about. It concerns all of us.

Mr. Cryer: Mr. Cryer rose—

Mr. Crouch: Mr. Crouch I know that the hon. Gentleman will return.

Mr. Cryer: Yes, I shall.

Mr. Crouch: The hon. Gentleman speaks with responsibility for this House. He is very much concerned with the House. Like all Members of Parliament, myself included, he exaggerates his position and his concern. However, he is concerned. For that reason, I listen to him without overdue interruption and am involved with his concern.
Today the hon. Gentleman is concerned with the motion that we in the House should have control of the processes or progress, or lack of progress, of the nationalised industries and the control of other bodies which are not called nationalised industries but for which the House has ultimate responsibility.
I congratulate my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) on having had the luck to draw first place in the ballot and bringing this problem before the House today, and on having chosen this problem to bring to our attention. It is terribly important.
I am glad to see that the hon. Member for Feltham and Heston (Mr. Kerr) is present today. He, too, played an important part in ensuring the accountability of the nationalised industries to this House. He was Chairman of the Select Committee on nationalised industries, as it was. I am sorry that that Committee lost its place and position; it lost its name; it disappeared; it was taken over by other Select Committees. I was a member of that Select Committee for eight years. I served with the hon. Gentleman with much enjoyment, in the widest sense of the term, across the Floor of the House. These are truly parliamentary Committees. I enjoyed serving with him and others in the parliamentary scrutiny of public bodies, nationalised industries and others. We are seriously concerned as parliamentarians, and not just as party fighters, to ensure that the House keeps an eye on Whitehall, Ministers, civil servants, the nationalised industries and all the delegated people in Whitehall. It is the only way by which the House, on behalf of the electorate, can keep an eye on the way in which those people behave and carry out their duties.
At times we exaggerate our own importance. I would always defend that right. It is important that we should spot deficiencies in management and see deviations and failures in administration either by civil servants or by those appointed to nationalised bodies of all kinds. I would not argue against this important function of the House of Commons.
We are concerned about the so-called progress or otherwise of nationalised industries and other bodies. Some are in a doubtful position. I do not think that anyone is against progress in the coal industry. We are concerned to get more out of the coal industry. We want to get more out of the efforts of those who work in the industry, whether it is scientific or management effort or the sweat of the brow of those who work at the coal face, and, as fair parliamentarians, we are determined that they should be properly rewarded. The industry should deliver the goods and get a fair return.
Much the same can be said about the steel industry. I am proud to have spoken recently from these Benches of my concern about what is happening in the steel industry. I am very concerned about the


decline of the steel industry, not only in this country, but in the world. I am concerned at the prospect of 25,000 men being put out of work in that industry. These are not crocodile tears about men being put out of work and put on the scrap-heap before their time. When economic change is taking place, it is all very well grandly to say "It has to happen", but it is tragic not only for 25,000 people but for 25,000 multiplied by four or five. I am thinking of the families of those men. The bell tolls for all of us when we talk of a change in an industry such as the steel industry.
It is not Brussels, Whitehall or the British Steel Corporation that should tell us what should happen; it is we in this House who should be concerned about what should happen in industries which are undergoing not only dramatic but traumatic change.
I hope that hon. Members will forgive me if I express myself strongly on this matter. I have seen the decline in the coal industry. A coal mine in my constituency was closed in 1968. I have never forgotten my discussions not only with Lord Robens but with members of the National Union of Mineworkers in my constituency. I was concerned about what the men had to tell me. Men aged 50 told me what it was like to be retired early and put on the scrap-heap. I am concerned not only about economic plans, the Treasury, the Department of Industry and those who speak in Brussels on this matter but about what happens to people. We should be concerned about people.
Other industries for which we must seek accountability in the House are also in a doubtful position. The progress of British Rail and of our road transport industry, for both passengers and freight, is in question all the time. The Post Office has been mentioned. It was suggested that, as the telecommunications side was successful, we need not worry about it; but we worry continually about the delivery of our mail—the less successful side of the Post Office. We are all worried about these matters. It is right that we should be worried and that we should take any necessary steps to put them right.
We in the House, on behalf of the nation, have advanced into the private

sector. For example, we have voted hundreds of millions of pounds into Rolls-Royce and British Leyland. Therefore, we cannot stand back and be disinterested. We are interested in the investment of public money voted by the House, not by either Labour or Conservative Governments.
The hon. Member for Keighley referred to the phrase "the elective dictatorship" used by my noble Friend Lord Hailsham in his book. We should reflect where dictatorship resides in our society today. It resides not here, not in the other place, but in society. I do not think that the Opposition should tell us to beware of an elective dictatorship. Dictatorships exist in both major parties. They can exist in government through the power of the Front Bench with its patronage. We know that dictatorship can exist in the Opposition from the way in which the Labour Party is currently organised. Labour Members need to consider whether they are satisfied with the elective dictatorship within what they claim is the alternative Government for Great Britain. They owe it to the nation and to Parliament. I am not attacking the Labour Party. I am attacking something that has grown up within the Labour Party that falls within the description of an elective dictatorship. My noble Friend Lord Hailsham has spoken to me of this dangerous trend in our society. My hon. Friend the Member for Folkestone and Hythe was right to raise the general question of control in that context as well.
We are concerned to have more effective control over our nationalised industries and other elected public bodies. I served for eight years on the Select Committee on nationalised industries. I had a more interesting or different time when I served for five years on the Public Accounts Committee. In both those areas I learnt more than the ordinary Back Bencher about the working of our society in the management of a great deal of public money voted by Parliament either through the great State Departments, at which the Public Accounts Committee looks, or through the nationalised industries, at which the Select Committee on nationalised industries, as it was, used to look.
For all the sound and fury expressed by the Select Committee on nationalised


industries and the Public Accounts Committee on the two or three occasions each year on which their reports are debated, their criticisms are listened to by only a few hon. Members. Look at the Chamber now, on this important occasion. I happen to be a rather sad Member of a previous incarnation of this House who believes in the House of Commons. I believe that this is the centre, the fulcrum of the reported democracy, as does the hon. Member for Keighley. He is always here on these occasions. Good luck to him. So is the right hon. Member for Ebbw Vale (Mr. Foot). So am I. We are all alone, but—

Mr. Cryer: Not quite.

Mr. Crouch: Not quite, no. We have our supporters. Forgive me, Mr. Deputy Speaker, I am wrong. One always exaggerates such things.

Mr. Costain: For the record, for 20 years I have never missed one of these occasions.

Mr. Crouch: Of course. A good democrat is always wrong, and I like to think that I am continually wrong in these matters. I am wrong today. But there are some hon. Members who are not here—only some—and I am sorry about that. But I am not complaining, because we live in different times.
My point this afternoon is that when we live in different times we must adjust ourselves to those times. I want to see more effective parliamentary control. I cannot take us back to Gladstone's days, when he formed the Select Committee on public accounts in 1861, and when he spoke for six hours and Disraeli spoke for only four hours—because we are limited. I know that the hon. Member for Keighley would almost deny, in his performance, that we are limited, and as we go on I might do so, although I do not want to do that.
I want to see more effective parliamentary control and not parliamentary management. What offends me most is when I hear hon. Members telling us how to run British Leyland, the British Steel Corporation or British Rail. How can they know, even though they may have worked for 20 years on the shop floor of British Leyland or have dug coal for 28 years? Unless they are actually working in those industries now, how can

those hon. Members tell us how best to run those industries? We must certainly have different points of view about control from the House, but not about management.
Greater consideration should be given to parliamentary investigation in Select Committees and on the Floor of the House, but I have some doubts about the 12 new Select Committees that have been appointed. I have always had doubts about the role and real intentions of the Front Benches. It is very easy to speak from these Back Benches, because one can speak one's mind. However, one can ask the two Front Benches "What are you trying to do? Are you just trying to absorb the energy of disgruntled Back Benchers and consume about 150 of them, through these new Select Committees, so that they can examine what goes on behind the scenes?" Is it the intention to shut those hon. Members upstairs in Committee rooms and leave them contained there, out of this place and off our backs? That is a question I ask.
The secret—it is an answer, not a secret, because nothing should be secret here—the answer lies in the hands of Members of Parliament. It lies with them to tell the Treasury Front Bench and the Opposition Front Bench what they want to know, what they must know and what those Benches must deliver. That is what could happen. Arising out of this motion is the important question of the way in which Parliament will go over the next two decades, until the end of the century.
The public are a little tired of the two Front Benches. Six months ago I would not have said what I am about to say. It is much easier after six months to say this, and I say it not out of any antagonism for my Front Bench or for the Opposition Front Bench but because I believe that the feeling in the country at the moment is that Britain should succeed.
Much of Britain is in the hands of the Government, through State Departments, delegated authority, nationalised industries and all sorts of other bodies, such as the National Health Service. But that control emanates from the Government Front Bench, and that Front Bench is dependent upon the Opposition Front Bench to keep it up to scratch. We all


try to do this, but it is principally the function of the two Front Benches.
The rest of the House has a part to play. We must scrutinise and question and satisfy the electorate not about the minutiae of things but that democracy as a whole is succeeding. We must show that we as Back Benchers stand for democracy. We must continue to fight and find out, on behalf of the electorate, what is going on, sustain what is good, and attack and destroy what is bad, indifferent and incompetent. I am sure that the hon. Member for Keighley would agree with me on that.
We are out to destroy incompetence—to search it out and eradicate it. We are out to put the Government Front Bench on the mat all the time. When that happens, this place lives again. It will not live again in the back rooms on the second floor of the House of Commons. Democracy has to be brought back into the House. What may have been discovered upstairs must be brought back on to the Floor of the House. The House must be crowded, with hon. Members standing at the Bar and sitting on the Floor, determined to hear the truth because a Back Bencher, or group of Back Benchers, has been determined to find out what is wrong.
I was interested in two things that happened over recent weeks. I dared to express my opinion on one of those matters and I will express my opinion on the other this afternoon. The first matter that I was interested in is something that, together with the hon. Member for Feltham and Heston, I have seen develop from its birth. I refer to what is known as the National Enterprise Board. Before that organisation was introduced into this country, I think it was called the Statforestag. I am not supposed to use a Swedish name, but that is what it is; it is the name for the equivalent of our National Enterprise Board in Sweden and Finland. The hon. Member for Feltham and Heston went to study that organisation at work.
Strange though it may seem to this House, I thought that the NEB was not a bad idea. It was not a bad idea to have a body appointed by the Government, agreed by Parliament, which was below the Minister, the various Secretaries of State and the Chancellor of the Exchequer. I thought that it was a good idea to have

someone with devolved responsibility to see that things were carried out efficiently, effectively and profitably, or, if the enterprises concerned did not make a profit, at least they should be conducted according to their terms of reference.
There has to be realism, when a Government take over industrial enterprises, about whether they can make a profit or will have to be sustained through a difficult period. The ideal of the National Enterprise Board was a good one. I was a member of the Public Accounts Committee when Parliament first interviewed two chairmen of that body. We had our criticism that they did not give us all that we wanted to know. Their argument was that they saw the NEB as a State merchant bank, unable to tell us everything until the accounts appeared at the end of the year, because it had some confidences, some secrets.
As a Tory and a capitalist, I understood that approach. I may be wrong, and some of my hon. Friends would disagree with me, but I saw advantage in this detached, devolved body having those responsibilities and reporting to Parliament at the end of the year—rather than the chairman breathing down the neck of every company in which the NEB had invested on Parliament's behalf.
A business cannot be run with someone breathing down its neck—least of all Parliament. We are the people least equipped to manage industry. We are cloistered monks. We are able in certain degrees, but we are not in the hurly-burly of day-to-day management of industry or unions. We have other abilities. We represent people. We should operate in that way and devolve some things to others.
The other matter that concerned me was something said by the Secretary of State for Trade in the previous Government, Mr. Edmund Dell. This will produce exclamations of disgust from the Opposition Front Bench—

Mr. Michael Foot: Mr. Michael Foot(Ebbw Vale) indicated assent.

Mr. Crouch: The right hon. Gentleman nods, although he has not heard what I have to say.

Mr. Foot: I am certain of it.

Mr. Crouch: Mr. Dell pointed to a change. I am not so conservative as the


right hon. Member for Ebbw Vale. We have set up 12 new Select Committees to give this place more power, but they will be any good only if we make them effective.
I began to think the other day that Mr. Dell had a point when he said that perhaps we should recruit a Cabinet of all the talents, from the widest area.

Mr. Rippon: Mr. Rippon indicated dissent.

Mr. Crouch: My right hon. and learned Friend does not agree with me. Solid Members of this House do not. I do not think of myself as a solid Member, but rather as a wandering minstrel. I thought that Mr. Dell had a point. After all, societies and nations bigger than ours find the solution to the management of their affairs by not recruiting all their Ministers from their elected Parliament.

Mr. Rippon: Like Mr. Cousins.

Mr. Crouch: No, I am not thinking of Mr. Cousins. I am thinking of the United States, for example, where the Executive is formed from outside and where Congress—Parliament—suddently comes into its own in criticising and representing the people against the Executive. Today, those on the Benches behind the Government are emasculated in their criticism, whichever party is in power, because one never knows when one might be called to that Front Bench.
This is our trouble. We do not live in the days of Fox and Pitt. We live in different days, when to sit on the Government Front Bench is financially an advantage. It was not a financial advantage in those days. They were the days of contest, when politics really meant something. Who can say that the nation is best managed today? We face enormous crises. Mr. Dell had a point. He did not say, as I might say, that we should fill the Government Front Bench completely from outside and form a United States-style Administration, with Parliament entirely as the critics of the Cabinet and the Cabinet, formed entirely from without, to be be criticised by Parliament from within.
The late Sir Winston Churchill used to say these things. He used to bring such people in, either to the House of Lords or to this House, by using parliamentary devices. He would bring in a few men

of talent because Parliament demanded them there to be accountable to Parliament.
This is a useful time to have had this debate. We should consider whether there is not some merit in a Ministry of all the talents. It would not diminish Parliament; it would increase Parliament's capacity and capability, and would give the opportunity to question what is done by the Government and by their nominated bodies and the nationalised industries.
My hon. Friend the Member for Folkestone and Hythe has done the House a service by bringing this subject before us so that we can range a little widely in considering how to improve this country's management, to its future success.

Mr. Michael Foot: The hon. Member for Rochester and Chatham (Mrs. Fenner), who has the next motion on the Order Paper, is hanging on our words, even if no one else is. I therefore assure her that I shall be happy to keep my remarks brief, to ensure that she may introduce her motion. I hope that I shall set the Financial Secretary a good example in that respect—as I hope I do, retrospectively, to those who have already spoken. I hope that the hon. Lady will be able to discuss the important matter that she wishes to raise.
So many subjects have been prompted by the motion moved by the hon. Member for Folkestone and Hythe (Mr. Costain) that it would be possible for me, and, I am sure, the Financial Secretary, to make lengthy speeches. The hon. Member for Canterbury (Mr. Crouch) has provoked us even more.
If I were to give my views in extenso on what I think of that speech of my old comrade Edmund Dell, I should detain the House for a long time. However, I can think of nothing more absurd, particularly when confronted by such a Ministry of all the talents as we have at the moment, than to think of displacing them to shove in some third-rate business men. Come to think of it, most of the third-rate business men are in the Government already, so far as I know, so we do not need any more.
As for bringing in these people from outside to solve all our problems, that was tried by Sir Winston Churchill but the


experiment was not altogether a success. Some of us thought at the time that the list of names of those great pillars of industry read, as someone said like a satire on all government.
Very soon it was proved that, despite all its demerits, this House of Commons has a virtue in being able to choose the elected Government. Certainly the course suggested would be a grave departure from that elected spirit. I therefore hope that the suggestion will be rejected—not merely because it has been recommended by the hon. Member for Canterbury but for other sufficient reasons as well.
The hon. Member also said that he was not a 100 per cent. enthusiast for the Select Committees that have been appointed. I cannot disguise the fact that my enthusiasm for them has been restrained over a considerable period. The House, however, has taken the decision, and I do not wish to say anything further that might prejudice the successful operation of those Committees.
However, I believe that it was right for the hon. Member for Canterbury to remind the House once again that it is access to this Chamber that is the central feature of this Parliament. It is access to this Chamber that is the essential democratic ingredient that makes it fuction. It is access to this Chamber that can be injured by the establishment of some of these forms of Committee, and it is that access that we wish to protect. I believe that the House has made a mistake in that direction, but the magnetic power and strength of that central feature of the House of Commons should be sufficient to overcome even the recent mistakes that were made, against my advice.
I wish to refer to another aspect of the matter, which was not directly touched on by the hon. Member for Folkestone and Hythe. It is true that his motion referred especially to the control of public bodies—I fully understand that—but it also refers to the control of the Executive as a whole. There are more dangerous ways in which the Executive can arrogate to itself excessive powers than by dispensing them to public bodies like nationalised industries or by providing insufficient or improper control over nationalised bodies, and there is a more direct way.
When I saw the hon. Gentleman's motion on the Order Paper, I thought for one moment that he was referring to the most recent and palpable example of the attempt by this Executive to try to interfere with the rights of this House and its control over the Executive. The matter was referred to in The Times today by its excellent reporter Mr. George Clark, who reports on what happened in the Cabinet the other day. He said:
In the end Lord Soames and Lord Carrington found themselves in what is described as 'a large minority', and the change of plan was announced. But ministers in the Lords are insisting that the Cabinet must take a tougher line on this issue.
The headline over the story is
Anger at lack of work in the Lords".
I am sure that we are all touched by that spectacle. John Milton described the scene as
The hungry sheep look up and are not fed".
We wish to ensure that they get a square meal, but later on in the Session and not immediately. If the question of giving a square meal to Members of the House of Lords had been the primary consideration, it would have gravely interfered with the rights of this House of Commons, and I am glad to say that on this occasion the House of Commons asserted itself and we established an important principle.
The question whether Bills are introduced here or in another place directly affects control over the Executive in many different ways, and I should like to indicate them briefly. I promise the hon. Member for Rochester and Chatham that I shall be brief.
If the practice of introducing large numbers of Bills, particularly controversial Bills, into another place were to grow, the balance between the two Chambers would be seriously altered—and I am glad to have the support of the Treasury here. I am sure that the Chief Secretary speaks for the entire Treasury in these matters. It would also seriously alter the way in which the other place operates as between the two parties. The opportunity of first introducing controversial legislation into the other place does not arise in the case of a Labour Government. If a Labour Government sought to introduce a highly controversial Bill, such as on trade union reform, into another place, it would be


mangled before it got here, because the Tory Party have a permanent majority there.

The Chief Secretary to the Treasury (Mr. John Biffen): Why does the right hon. Gentleman spoil a good case? Surely, he will recollect that the Scottish Development Agency Bill, which was far from being uncontroversial, was introduced by the Labour Government in the House of Lords.

Mr. Foot: The principle of the matter had already been dealt with in the establishment of the National Enterprise Board. I do not believe that the right hon. Gentleman can in any sense compare that with the monster measure referred to by the right hon. and learned Member for Hexham (Mr. Rippon). On one occasion I think that he said that it was five Bills in one. On the next it was 10 Bills in one, and perhaps it is 18 Bills in one.

Mr. Rippon: Five.

Mr. Foot: Five is good enough to be going on with. The right hon. and learned Gentleman has already told us that he likes it in parts, but we shall have to wait a little longer to see which parts he likes. He has told us a few parts that he intends to deal with when the opportunity arises.
Returning to the point that seems to anger the Chief Secretary, if a Bill of that controversial scale had been introduced by a Labour Government, it would have been mangled, mutilated or transformed—whatever one calls it—before it reached this House. Therefore, that method of legislation for a controversial Bills is not open to a Labour Government. However, if that method of legislation were invoked by this Government it would alter the arrangements and understanding of what measures should be introduced in another place. There again, I am glad to say that this is not a controversial question, and I put the right hon. Gentleman's mind at rest at once.
When we strongly urged that the Government should not proceed to arrogate fresh powers to the Executive by introducing such measures into the House of Lords, we took account of the recommendations made to this House by the

Procedure Committee which had been set up to look at the matter and which sat in 1970. The hon. Member for Tiverton (Mr. Maxwell-Hyslop), who sometimes seeks to enlighten the House on these matters, suggested at Question Time the other day that there was a good foundation for proceeding in the way that the Government originally proposed. I am sure that he will find that he is mistaken when he looks at the facts. The Procedure Committee looked at the matter in 1970–71 and made recommendations to the House, which were discussed.
Sir Robin Turton—Lord Tranmire as he now is—a highly respected Member of the House, was Chairman of that Committee. He made it clear
that minor Bills, even if they have a financial aspect, could be introduced into the House of Lords in November and December in order to ease the work throughout the Session."—[Official Report, 16 November 1971: Vol. 826, c. 372.]
He was talking of minor Bills. He never dreamt of doing it to any other kind of Bills.
On the evidence of the right hon. and learned Member for Hexham, no one can possibly describe that Local Government, Planning and Land Bill as a minor Bill. It is not even a minor single Bill. On the figure given by the right hon. and learned Gentleman, it is five major Bills.
To take the matter further, in the same discussion of the Procedure Committee there was a remarkable speech by the right hon. Gentleman who is now the Home Secretary and who was at that time the Leader of the House, dealing with exactly that question. It was a very good speech. I have it almost by heart, but I shall read it to the House because I do not want to make any mistake.
My right hon. Friend the Member for Wolverhampton, South-West referred to privilege and the House of Lords.
—the right hon. Member for Down, South (Mr. Powell) was his right hon. Friend in those days—
My personal experience has led me to believe that this could be a helpful proposal, without in any way detracting from the privileges of the House
—that is this House.
He went on:
I am absolutely firm


—when the Home Secretary says that he is absolutely firm about something, we know he is really giving his mind to it—
in my view that there are many Bills, the vast majority, which by their very nature, political or, of course, financial, must start in this House. There can be no question of that.
That disposes of any suggestion that there was any quarrel or argument in the Cabinet, particularly of a Government of all the talens, in which its members were seeking to look at these matters fairly.
He went on:
They must start in this House and they do. No Government would ever suggest that they should not."—[Official Report, 16 November 1971; Vol. 826, c. 375.]
The idea that such a Bill should ever have been introduced in another place was pure fantasy in the minds of the Opposition. No such proposition had ever been put before such a far-seeing Cabinet as we now have. It was a clerical error, or perhaps the printers in the House made a mistake, put on a wrong name and and sent it to the House of Lords in error. At any rate, we are glad that the minor clerical error has been discovered. We are glad that we are able to keep the Home Secretary to his word. We are glad that the Cabinet, as I am sure the Financial Secretary will confirm, did not spend a single second discussing this matter. It is as determined as the Home Secretary was in 1971 that we should not have this fundamental contravention of the spirit of our constitution, which would be the case if highly controversial measures were ever introduced into another place first. If that were to happen, it would be a real threat to the control of this House over the Executive. I hope, therefore, that the Government are not dreaming of returning to any such proposition.
I end where I began, by thanking the hon. Member for Folkestone and Hythe for raising this matter and enabling me to introduce this highly topical aspect of the subject that he raised.

The Financial Secretary to the Treasury (Mr Nigel Lawson): I hope, Mr Deputy Speaker, that it will not be out of order if I address myself to the motion. I congratulate my hon. Friend the Member for Folkestone and Hythe (Mr. Costain)

on having moved the motion. My hon. Friend has given sterling service to the House as a member of the Public Accounts Committee over a long period. It is correct to say, I believe, that he is the longest serving member of the Committee and that he has not missed a single meeting, which is a remarkable record. His assiduity and record of attendance at the Public Accounts Committee and at debates is a lesson to many hon. Members on both sides, including many who are not present for this debate.
The right hon. Member for Ebbw Vale (Mr. Foot) made an interesting excursion. We all recall—indeed, no one will ever forget—how he demonstrated his belief in the importance of parliamentary scrutiny by becoming the first Leader of the House to introduce five guillotine motions in a single day.
I was sorry, in one way, that the right hon. Gentleman curtailed his speech. Had he not curtailed his remarks, he might have been able to inform the House—the House was agog to hear—whether he agreed with his hon. Friend the Member for Keighley (Mr. Cryer). I heard the right hon. Gentleman, in a sedentary intervention, commend his hon. Friend for his speech after his hon. Friend sat down. We would have liked to hear whether he agreed with his hon. Friend that members of the Cabinet, if there should be a Labour Cabinet at any future date, should be elected by the Parliamentary Labour Party. I was surprised that the right hon. Gentleman did not address himself to that important constitutional point. There is still time for him to tell the House where he stands. Evidently he is unusually reticent and shy about expressing his view on what is, constitutionally, a matter of the first importance.

Mr. Russell Kerr: Is the hon. Gentleman aware that this system, suitably modified, has been operating successfully in Australia for many years? The actual allocation of portfolios is the job of the Prime Minister, but the question who will constitute the Cabinet is a matter of election. It has proved very successful.

Mr. Lawson: I have a great respect for the hon. Member for Feltham and Heston (Mr. Kerr), but on this occasion I was rather more interested in the


opinion of the right hon. Member for Ebbw Vale.
A number of searching contributions were made to the debate from both sides of the House. In the interests of my hon. Friend the Member for Rochester and Chatham (Mrs. Fenner), I will skate over them briefly. I hope that those who spoke will not feel that this involves any discourtesy on my part, but my hon. Friend the Member for Rochester and Chatham has been waiting patiently and should be given some time to deploy the arguments in favour of her motion.
I would only say that when the hon. Member for Keighley, who made, I think, the longest contribution to the debate, inveighed at length about the present constitution and about the elective dictatorship that he saw—the hon. Gentleman quoted the phrase of my noble Friend the Lord Chancellor—I wondered what he proposed as a means of reducing and constraining the unfettered power of the parliamentary majority, for the time being, in the House of Commons. He proposed nothing at all. All that he is known to advocate is the abolition of the House of Lords. That would make the elective dictatorship more of a dictatorship. It is strange that the hon. Gentleman was a member of a Government who had an opportunity to grapple with this problem, if they so wished, but did absolutely nothing.
My hon. Friend the Member for Canterbury (Mr. Crouch) took a very different view. He thought that, far from members of the Cabinet being elected by Members of this House, its members should not even be appointed from members of this House but should be appointed exclusively from the good and the great outside the House. I thought that the analogy that my hon. Friend drew with the American constitution betrayed a slight misreading of the nature of that constitution. It is very different from ours. I would not draw any conclusions from that.
Other hon. Members, notably my right hon. and learned Friend the Member for Hexham (Mr. Rippon), spoke a great deal about the problem of the relationship between the House of Commons, Parliament and the trade unions. I would like to deal with this at a little length. It was a central theme running through

the remarks of the hon. Member for Aberdare (Mr. Evans) and others.
It was pointed out that Supply days were not devoted to debating Supply. I share some of those feelings. But this is a matter for the Opposition. The Opposition can choose what they wish to debate on a Supply day. They can choose to debate Supply if they so desire. An opportunity for some recovery of the loss to this House of proper debating of Supply, a loss I have always deplored, occurs now that Estimates have been put on a cash limits basis. Votes on Estimates, particularly Supplementary Estimates, will have a real meaning, which they have lacked for a long time in an inflationary age.
My hon. Friend the Member for Folkestone and Hythe has provoked a most interesting debate. It is perhaps strange for a Treasury Minister to be replying to a debate covering so many wide subjects. The Treasury is, however, accustomed to covering a wide range of matters. There is not much that goes on in the Government in which the Treasury does not have some interest. My hon. Friend has presented me with a challenge. The subject relates essentially to the way we—Ministers, Members of Parliament and civil servants—should do our work. I cannot give my hon. Friend an authoritative reply. Every Minister and every hon. Member will have his own perspective on the issues he has raised.
As I understand my hon. Friend's themes, they are basically Ministers' difficulty in controlling the detailed operations of their Departments and in responding to parliamentary questions and the other activities of hon. Members, and the differences between the frameworks of supervision and accountability with which businesses on the one hand and Government on the other have to work. My hon. Friend also referred, more briefly, to the special position of businesses in the public sector, which are subject to layers of supervision by Government agencies, Departments, Ministers and Select Committees.
On my hon. Friend's broadest theme, I do not have much that is new to say. We all appreciate the difficulty facing Ministers in having to be willing to respond to questions about the minutiae of their Departments—minutiae about which


they may know very little until they brief themselves shortly before dealing with the question that they have to answer. But I think that we just have to live with this—with the fact that the Government are different from business. People expect the Government to be accountable and responsible in ways that businesses could not and should not match.
People elect Members to whom they look both to change the framework within which certain operations of government are carried out and to ensure that all those operations are run in a way that is properly responsive to the needs of individual citizens. Ministers, for their part, must be responsible to Parliament both for the general policies pursued by the Departments and for the detailed execution of those policies. It is inevitable that the task of government becomes more complex as industrial life becomes more complex. But this most definitely does not mean that we should not be constantly alert to the possibility of reducing the complexity of the task of government.
In general, there is far too much government, and people expect far too much from the Government. I think that we can say that this Government are doing far more than any Government since the war to cut down the extent of Government interference in areas where responsibilities are best discharged by the people directly involved. This should eventually mean—and this should satisfy my right hon. and learned Friend the Member for Hexham—less legislation rather than more.

Mr. Rippon: Can my hon. Friend give the assurance—because there may be some misunderstanding as a result of the speech of the right hon. Member for Ebbw Vale (Mr. Foot)—that the Local Government, Planning and Land Bill will be introduced into this House?

Mr. Lawson: Yes, Sir; I can give my right hon. and learned Friend that assurance.
Alongside the general theme of the importance of individual responsibility, clearly expressed in our economic policy, are the Government's own efforts to make their operations more efficient and less burdensome. I should like briefly to say something about that, particularly in the

context of improving the workings of the nationalised industries, which are mentioned in the motion and to which my hon. Friend devoted a fair amount of his contribution, and about which other hon. Members have also spoken. I should like also to say something about the contribution of the House through the long-established Public Accounts Committee and the new departmental Select Committees.
The Government's approach to the nationalised industries is based in general on the view that efficiency will be increased by provoking competition wherever possible, by moving industries into the private sector, by introducing private capital into them, and by reviewing the extent of monopoly powers. The House will be aware of the legislation that we are proposing concerning the introduction of private capital into British Airways, British Aerospace and the National Freight Corporation, and of the review announced by my right hon. Friend the Secretary of State for Industry of the telecommunications monopoly.
Those measures, and others that may result from the current review that Ministers are making of policy, will reduce the extent of public sector monopolies. That itself diminishes to some extent the difficult and acute problem of accountability for those industries that remain in the public sector. Nevertheless, that problem remains, because industries remain, and will remain, in the public sector. Those industries have a privileged position in a number of respects. It is important that they should be seen to be exercising those privileges responsibly. That is why the Government have included in the Competition Bill provisions for scrutiny by the Monopolies and Mergers Commission of the efficiency and performance of the industries.
In addition, the House has recently set up the new structure of departmentally related Select Committees, to which my hon. Friend and other hon. Members have referred. Those Committees will examine the industries sponsored by the Departments with which they deal.
There is no doubt—here I agree with my hon. Friend—that the accountability of the nationalised industries is a complex and difficult matter. I do not think that since the nationalised industries came


into being any Government or Parliament have satisfactorily got this relationship on a sensible footing. It is extremely difficult. It may be a problem that can never be solved, which is another reason for having as few industries as possible in the nationalised sector.
I have outlined the objectives that must be reconciled. I hope that my hon. Friend will agree that the developments that I have described—briefly, because of the constraint of time—represent a useful step towards those objectives.
There are 12 departmentally related Select Committees—the new Committees that the House recently established—covering the work of all the principal Government Departments and associated bodies. This is the first time that this has happened. How the Committees will work out in practice remains to be seen. But there can be no doubt that potentially they represent a major extension of Parliament's power to create an effective system of scrutiny over the activities of the Executive. Certainly, that is what the House thought when it gave its approval to the setting up of the Committees.
I noted the scepticism of my hon. Friend the Member for Canterbury, but, as he rightly pointed out, at the end of the day it is up to hon. Members themselves to make sure that the Committees work and do a good job.
My hon. Friend the Member for Folkestone and Hythe referred in particular to the need for the Committees to avoid getting bogged down in electioneering politics. I agree. Certainly, it is one of the traditional strengths of Select Committees that they tend to develop a corporateethos of their own. The Public Accounts Committee is a classic example. I very much hope that the new Committees will follow this tradition and avoid the extremes to which my hon. Friend refers. Again, it remains to be seen; it is up to the hon. Members concerned.
It will be for the Select Committees themselves—that means the hon. Members who serve on them—to decide within their terms of reference what will be their subjects of inquiry. I have no doubt that they will want to consider a number of aspects of public administration, many of them aspects to which my hon. Friend refers in his motion, including the need for economy in administration.
I agree with my hon. Friend, too, that the Committees would do well to examine from time to time whether the collection of particular departmental data is really necessary and that they should not simply content themselves with asking for ever more data of a kind that does absolutely nothing to improve the quality of parliamentary scrutiny or parliamentary control but whose only effect is to add to the burden on Departments.
As for the specific question of the Select Committee structure in relation to the scrutiny of the nationalised industries, to which my hon. Friend referred—a change that my hon. Friend the Member for Canterbury lamented—the House will recall that the Procedure Committee recommended in its report that the work previously done by the Select Committee on nationalised industries should be undertaken in future by the appropriate departmental Committees. It further recommended, however, that a Joint Sub-Committee representing the Select Committees most concerned should be set up to consider common problems affecting the nationalised industries. The House agreed on 25 June provisions which would enable such a Sub-Committee to be established. The new Select Committee concerned will no doubt now wish to follow up this proposal and perhaps re-create to some extent the Select Committee on nationalised industries in that way.
I turn to the Public Accounts Committee, particularly because my hon. Friend has given such distinguished service to it. I suspect that a great deal of his concern, and a great deal of the concern that led him to choose this motion when he was so fortunate as to come first in the ballot, derived from his membership of that Committee, his experience there and what he had learnt from it.
The PAC is the opposite of the new Select Committees. It is the oldest of our Select Committees and is a monument to Mr. Gladstone. I say that even though no Liberal hon. Member has condescended to honour us with his presence during this debate.
It is sometimes suggested that a weakness of the PAC is that it exercises its control only once the money has been spent and that that is too late. The


horse has bolted before the stable door is locked. That is true in a literal sense, but to my mind it does not properly reflect the nature of the role of the PAC or of the Comptroller and Auditor General.
Not only does it ignore the valuable work of the PAC in drawing conclusions from its examinations of Departments and establishing precedents and the guidelines that have a real bearing on, and contribute to, the quality of the whole of the Government's management of public expenditure. The accumulated wisdom of more than a century of such activity now fills two thick volumes, appropriately entitled "Epitome of PAC Reports". I have not read it but I am sure it is part of the bedside reading of the right hon. Member for Ebbw Vale. It also overlooks the essential feature of the whole framework of parliamentary control, which is that the control must be based firmly on the principle of appropriation.
Ministerial accountability to Parliament for voted funds must be designed, first and foremost, to demonstrate that the systems of financial control operated by Departments are efficient, that financial transactions have been correctly authorised and accounted for, and that expenditure has been incurred on approved services and in accordance with the statutory and other regulations and authorities governing them—in other words, in accordance with what has been decided and determined by this House.
I have spoken at some length about the activities of the PAC and of the Comptroller and Auditor General in order to demonstrate the importance that this Government attach to this aspect of parliamentary control of the Executive. The House will also recall that in June my right hon. Friend the Leader of the House announced that the Government were continuing the review, initiated by

the previous Administration, of the Exchequer and Audit Acts which form the legislation that established the office of Comptroller and Auditor General and set up his Department.
The provisions of those Acts, which in their essentials are more than a century old, remain valid and, indeed, observed, but it is sometimes difficult to relate them and their underlying assumptions directly to the way in which the Government manage and account for public spending nowadays, or to the work of a modern national audit office. I do not wish to anticipate the conclusions of the review, either in general or in relation to particular aspects of the Comptroller and Auditor General. but I can tell the House that good progress is being made with it.
I do not suppose that I shall have satisfied my hon. Friend on every point. I have tried to address myself to most of the points that he raised in a very thoughtful speech. I hope that I have shown that the Government are aware of the problems to which he addressed himself. I hope, further, that he will agree—in the light of what I have been able to say today—that all is not lost and that there is no need for a further review, over and above what I have described, of arrangements for supervising the activities of the Executive, the nationalised industries and other public bodies. There may be a need for vigilance, but there is no need for a further review. In this spirit, I invite him to ask leave to withdraw his motion.

Mr. Costain: I thank my hon. Friend for his reply. In deference to my hon. Friend the Member for Rochester and Chatham (Mrs. Fenner), who has been extremely patient, and because I know she has done a lot of work on the motion she has tabled, I beg to ask leave to withdraw the motion

Motion, by leave, withdrawn.

EARNINGS RULE

Mrs. Peggy Fenner: I beg to move,
That this House commends the Government on their declared intention finally to abandon the earnings rule for retirement pensioners within the lifetime of this Parliament.
I am not sure of the name of the cynic who said that Members of Parliament sat and listened only while they waited for their own turn to speak. I assure the few hon. Members who are here that I had quite a battle to get back to the House. I love and respect the traditions of the House and I have been known to sit here for long hours without raising my voice.
I was prompted to set down this motion because of a recent speech by my right hon. Friend the Secretary of State for Social Services. Speaking to the National Association of Pension Funds about retirement pensions, he referred to the widespread interest in a system of flexible retirement. However, he asserted that the operation of the earnings rule was a heavy disincentive to those who wished to work on after pensionable age.
My right hon. Friend declared the Government's intention to end the earnings rule for retirement pensioners during the lifetime of this Parliament and announced that a White Paper on the elderly would be produced next year which would set out the views of the Government on this and other matters concerned with the elderly.
It is clear that any long-term changes involving retirement pensions can best be achieved by all-party agreement. My right hon. Friend spoke of the need to prevent ping-pong pensioneering in election campaigns. Over the years there has been a continuing indication of the basis of the all-party agreement on the earnings rule. Though my motion formally commends the Government, I pay tribute to the Back Benchers who across party lines, and in many Parliaments, have jointly supported this view.
When the earnings rule was originally introduced in the National Insurance Act 1946, which implemented the Beveridge plan, it was necessary because Beveridge insisted that retirement should be a condition of receiving a State pension. He

considered that that went hand in hand with the concept of a flexible retirement age and higher pensions for those who deferred retirement beyond the minimum pension age.
There is constant reiteration that it is a retirement pension by both Front Benches, but I know that they will accept that outside the House it is referred to by most people as the old-age pension and that the people who draw it are affectionately known as OAPs. In the event, Beveridge's proposals were not exactly followed. The earnings limit set at that time was £1 a week instead of the £3 per month that he proposed. Men over 70 and women over 65 were treated as being retired whether or not that was the case. They were thus able to earn as much as they liked without earnings affecting their pensions. The rule is still in force basically in the form in which it was introduced, although the weekly earnings limit has been raised to its present level. Ever since the rule was introduced, members of different political parties in this place have tabled parliamentary questions asking for the abolition of the rule or for its specific relaxation.
The rule was submitted twice to the National Insurance Advisory Committee, once in 1955 and again in 1966. On both occasions the committee favoured its retention, but there were notable dissensions in the 1955 report. I think they were from Professor Titmuss and Miss Spellman. Successive Governments over the years have allowed minor relaxations but have refused to abolish the rule, partly, I suspect, because they have wished to preserve the nature of the pension as a retirement pension but increasingly, I believe, because of general economic and social considerations.
The late Richard Crossman, in his plan entitled "National Superannuation and Social Insurance", considered abolishing the earnings rule but decided to retain it. He explained that, so long as the retirement condition remained, something corresponding to the present earnings rule was needed to support it. He referred to the cost of abolition, which in April 1968 was estimated at about £150 million. In 1972, one of my hon. Friends—the then Member for Birmingham, Yardley—introduced a Private Member's Bill aimed at


increasing the band of earnings immediately above the earnings limit in which only 50 per cent. of the pension is lost for every pound earned.
My hon. Friend the Member for Somerset, North (Mr. Dean), then Under-Secretary of State at the Department, said:
I do not seek to debate the earnings rule in principle, except to say that nobody loves it. If we were starting again, we would seek to avoid having it."—[Official Report, 21 April 1972; Vol. 853, c. 950].
He estimated the cost of abolition at that time at about £110 million gross, or £80 million net. The Government's Social Security Act 1973 also retained the earnings rule.
The next Government, in their 1975 Act, retained the rule but added the promise of regular review.
When the Social Security Benefits Bill of 1974–75 was going through the House, the then Opposition introduced an amendment in Committee seeking to raise the earnings limit in three stages: £20 in April 1975, £35 in April 1976, and £50 in April 1977. A Government Back Bencher, the hon. Member for Islington, South and Finsbury (Mr. Cunningham), with great courage, voted for the Opposition's amendment and it was carried. On Report, other Government Back Benchers supported the amendment and it was secured.
The Minister at that time made clear that he was not defending the principle, but again he referred to the cost, which at that time, he said, would be about £225 million gross, or £170 million net.
In a telling speech during that debate, calling for abolition, my hon. Friend the Member for Rushcliffe (Mr. Clarke), then Opposition spokesman on social security matters, said:
It has a serious disincentive effect on those trying to continue to work."—[Official Report, 29 January 1975; Vol. 885, c. 483.]
A Government Back Bencher, now the hon. Member for Mitcham and Morden (Mr. Douglas-Mann), said during the same debate that this country could not afford such a serious disincentive to work, which damaged our economic performance.
Because of that amendment passed in Committee and sustained by Back Benchers on both sides against the wish of

the then Government, the gradual relaxation of the rule passed into law in section 30 of the Social Security Act 1975.
In 1975, the rule was estimated to affect about 20,000 people, but, according to updated figures which I have for July 1979, the total of those on whom the earnings rule now operates is 2,880. These are the people who, despite the rule, continue to work and suffer. Great resentment is felt by those affected by it.
Those figures, however, are virtually meaningless since what no one knows or can estimate is the number of people who are deterred because the earnings rule means that it is not worth their while to continue in some work.
I regard this as the nation's loss. I never cease to be astonished at the accumulated wisdom, experience and energy brought to our national life by those often erroneously described as "elderly". I recognise that not all people reaching whatever we ultimately deem to be retirement age are blessed with sound health and energy or, indeed, have a wish to continue to work, but I am sure that we should not have, and should never have written into our pensions system, a positive deterrent to those who can and very much wish to continue to work.
Perhaps the phrase "flexible retirement age" will cause some qualms in circles which support retirement five years earlier for women. Personally, I find it difficult to sustain the argument for equal pay, on the one hand, and for the right to early retirement, on the other.
We hear talk of the effects of technological advance—at Question Time today my hon. Friend the Under-Secretary of State for Industry was asked about robotics—and perhaps in time the microchip technological age will usher in a shorter working day, a shorter working week and a shorter working life, but, with our nation's seeming inability at present to sustain even a modest growth in our gross national product, the benefits claimed for the microchip do not seem exactly imminent.
I welcome the promise of a White Paper in the spring, with its suggestions of flexibility, and especially do I applaud the Secretary of State's declared intention to see an end to the unloved earnings rule. I am only sorry that the pleasure of this day is not shared by my late hon. Friend


Sir Gerald Nabarro. He pursued the earnings rule with the same tenacity as he pursued the anomalies in purchase tax, and he did this in company with Back Benchers of all parties who over many years have joined in a non-partisan way to seek to ease and finally to abolish this rule.
In conclusion—I shall be brief, since over the years I have voted for shorter speeches—I hope that I shall not stray out of order if I ask for greater flexibility in the disregard applied to the disabled, which—let us face it—is another form of earnings-incomes rule. In a petition which I recently presented to the Department, the day patients at a handicapped persons' centre in my constituency, some of them very badly disabled, pleaded to be able to keep more of the money which they earn. Surely, as in the case of older folk, it must be right to encourage those who are already so disadvantaged by handicap or disablement to feel a greater sense of normality through work and earning whatever is possible, if that is in accordance with their own wish.
After so many years, with the principle of the earnings rule long since called into disrepute by politicians of all parties, when all that remains are the accepted difficulties of economic constraint, it is an act of both courage and determination for my right hon. Friend so to have declared his intention, and I hope that the House will commend that declared intention today.

Mr. J. W. Rooker: I, too, shall be brief because of the constraints of time imposed upon us. I congratulate the hon. Lady the Member for Rochester and Chatham (Mrs. Fenner) on her good fortune in securing a short debate for her motion. I agree at the outset that there is no argument about the principle. We on these Benches would have wished to abolish the earnings rule. Basically it comes down to a question of priorities. That is the problem. Today, there are far fewer people caught by the rule than there were a few years ago, and the hon. Lady rightly paid tribute to my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) for the fight that he put up. Far be it from me to say that Back Benchers should not vote against their own Government.
I have not checked back, but I am pretty sure that I did not vote with my hon. Friend on that occasion, because of the issue of priorities. I see that the Under-Secretary of State has checked and knows that I did not. The argument on priorities weighed heavily with me, and I was not prepared to put this issue above other aspects of public expenditure. This is a problem, and I hope that the Under-Secretary of State will say something about the cost. Where does this figure lie in the Government's priorities? I accept that they are not committed to phasing the rule out in this Session, but they intend to do so during the lifetime of this Parliament.
The hon. Lady the Member for Rochester and Chatham said that we should not play political ping-pong with pension issues but should get an agreement. I must remind her that the present Government have announced other intentions. In the Bill which they have published they are already starting to play political ping-pong with pensions, because clause 1 will change the rule under which the general uprating of pensions takes place. That is an intention that we are committed to reverse, so there is already some ping-pong coming in, and it affects all pensioners, not just those covered by the earnings rule.
With the earnings limit now in excess of £50 a week, not all that many pensioners are affected. I accept the argument about a flexible retirement age, but there are not all that many pensioners today who are put off by the earnings rule at its present level.
Although I agree with what the hon. Lady said, I argue that our concern should be for the generality of the present Government's intentions in regard to basic pensions. I hope that the hon. Lady will not support them when we come to debate that Bill. Their declared intention is to cut the pension by changing the uprating rules.
Where does that figure in the priorities of the Government vis-à-vis the earnings rule? When the Bill is discussed, there will be arguments in favour of abolishing the earnings rule, which affects very few people—those earning considerably higher than the normal pensioner's income. At the same time the Government are seeking to cut pensions. For that reason, we shall


be back to ping-pong politics over pensions. The Opposition deplore that, but it has been forced upon us by the actions of the Government.
I shall not add anything further because I know that the Minister wishes to make some remarks. It is better that the House knows the Government's intentions, so I shall not take up any more time.

The Under-Secretary of State for Health and Social Security (Mrs. Lynda Chalker): On behalf of the Government, I welcome the motion of my hon. Friend the Member for Rochester and Chatham (Mrs. Fenner) and the further opportunity which it provides for a debate, albeit short, on the earnings rule. I shall comment later on the remarks of the hon. Member for Birmingham, Perry Barr (Mr. Rooker). We should recognise that in recent years there has been a strong feeling that it is wrong to discourage people who want to work after pension age. There is a widespread belief that the earnings rule for retirement pensions discourages pensioners from working.
At my hon. Friend the Member for Rochester and Chatham pointed out, in our manifesto we undertook to phase out the earnings rule during the lifetime of this Parliament. At present we estimate that only about 5,000 pensioners have their pension reduced or extinguished because of the earnings rule, out of the 2 million pensioners who are within the scope of the rule, in so far as they are in the age bands to which the rule applies. The rule applies for women between the ages 60–65 and for men between the ages 65–70. In 1977, the latest date for which figures are available, approximately 140,000 people deferred retirement. Most were earning above the earnings rule limit.
The abolition of the rule figured in the last three election manifestos of the Conservative Party. In our 1974 election manifesto we condemned it on the grounds that it was socially harmful as well as being widely resented. We said that it discouraged able men and women—merely because of their age—from making a contribution to society which would help both them and the rest of society. We pointed out that we had relaxed the rule in the past and that we would relax it further. As my hon. Friend the Mem-

ber for Rochester and Chatham pointed out, we took many steps during our period in Opposition to try to relax the rule and to make it easier for older people to continue working after the age of 60 or 65.
Earlier this year we took a further step towards the abolition of the earnings rule. During the passage of the Social Security Act 1979, we forced upon the then Labour Government a provision which enabled steps to be taken towards abolition by an order under an affirmative resolution instead of by main legislation. We are now examining ways of fulfilling our commitments.
The hon. Member for Perry Barr said that it was a matter of priorities. I accept that. We must therefore consider the most appropriate method by which to end the rule. It is important to consider the effects of different approaches on other elements in pension provision, including possible future developments.
We must also reconsider the assumptions on which the cost of abolition, as set out in the 1978 report on the earnings rule, was based. There is no doubt, however, that the cost of phasing out the earnings rule will be considerable. For that reason, we cannot abolish it immediately. We knew when we took office that our economic difficulties were great. Until we were able to examine the books, we did not know how great they were. Our immediate aim, therefore, must be to get the economy right. That is our first priority. Until we have achieved that, improvements in social security, including abolition of the earnings rule, must take second place. Our first priority must be to stabilise expenditure.
The hon. Member for Perry Barr, when he spoke of priorities—which is a daily headache for every Minister—asked which programmes should receive priority. It has been heartening for us to note how often Back-Bench Members have raised the issue in correspondence, in motions, and so on. We know that there is a real wish to abolish the earnings rule. We must find a way in which to fulfil it. There is no doubt that the work carried out by the Office of Population Censuses and Surveys, the report of which we hope will be published next year, on older workers and retirement will give more information on the topic.
We cannot move immediately to abolition. We knew that we would have difficulty in fulfilling our commitment, and we do not hide that fact.
In these circumstances, although the abolition of the retirement pensioner's earnings rule cannot command priority over more pressing candidates for public spending, it remains a priority of the Government. We are heartened by the terms of the motion.
My hon. Friend mentioned flexibility. It is the intention of the Government to look also at the question of a flexible retirement age. It is interesting that in the survey the findings of which are to be published next year just over half of those questioned who had already retired said that they would have preferred to do so gradually. Others who had retired, because they were bound to do so by the present rules, said that they would have liked to have continued working, partly because they liked the work, partly because they did not want to be bored, and partly because they wanted to make a real contribution. There is no real doubt that there is a case for abolition of the earnings rule. However, we realise also that there is much to be done in the meantime.
The hon. Member for Perry Barr referred to the Social Security Bill published two weeks ago, which we shall debate in

the coming weeks and months. He referred to the change in the uprating for retirement pensions. We have said that we shall increase pensions by the level of price increases, at the least. At the present time, that is one of the most valuable steps we can take to protect pensioners against rising prices. That is the minimum that we shall do.
We have been discussing the earnings rule for retirement pensions. A different earnings rule applies to the wives of retirement and invalidity pensioners, who receive an increase in their pensions in respect of their wives who live with them. That rule reduces the amount of the increase if the wife's earnings exceed a specified limit, which is currently £45. The 1978 report on the earnings rule dealt separately with the earnings rule for retirement pensioners and that for the wives of retirement or invalidity pensioners. Both sides of the House were agreed that we should not uprate the earnings rule limit for the wives of retirement and invalidity pensioners, and that has this year become part of our law.
My hon. Friend was discussing the earnings rule as it affects retirement pensioners, and it is that that we are committed to abolishing. That rule is bad—

It being Seven o'clock, proceedings on the motion lapsed, pursuant to Standing Order No. 6 (Precedence of Government business).

Orders of the Day — PETROLEUM REVENUE TAX BILL

Order for Second reading read.

7 pm

The Minister of State, Treasury (Mr. Peter Rees): I beg to move, That the Bill be now read a Second time.
This modest Bill is designed to advance the payments of petroleum revenue tax. It was foreshadowed in the announcement of my right hon. and learned Friend the Chancellor of the Exchequer on 15 November, and an Inland Revenue press release of the same date was issued giving the broad approach that the Government adopt to this problem. The House had an opportunity to consider, although not to debate in any detail, the Ways and Means resolution on this topic last Thursday.
Consideration of this problem was triggered—I say this candidly—by the Government's cash flow problem, which was largely due to arrears of telephone bills caused by industrial action and involving £1 billion or more, and delayed payments of VAT.

Mr. Denzil Davies: The Government are grubbing around for money.

Mr. Rees: The right hon. Member for Llanelli (Mr. Davies) has had some experience of these matters, and I am surprised that he takes such a cavalier attitude to the matter. Whether or not this is grubbing around for money, Governments, as well as individuals and bodies corporate, also require cash. The prospect was of the public sector borrowing requirement increasing from £8·3 billion to £9 billion. Inevitably, the Government reconsidered the position, and the proposal before us represents the fruits of their reconsideration.
In view of the flippant and cavalier comments from the Opposition Front Bench, I should explain that the proposals are justified on their merits, in that they will bring the regime for payment of PRT into line with that for the payment of royalties on North Sea oil revenues.

In this regard they will also bring this country into line with other oil-producing countries. If one has to look around for additional money, it is fair to say that the oil industry is perhaps the most buoyant sector of the United Kingdom economy.
The House will recall that PRT is payable by reference to accounting periods, normally running from 1 January to 30 June and from 1 July to 31 December. An account has to be submitted by an oil company two months after the ending of the accounting period, and payment has normally to be made four months after the end of the accounting period. In other words, accounts have to be submitted by 1 March and 1 September and payments made on 1 May and 1 November in any year. Interest is payable on payments of tax that are in arrears at the rate of 9 per cent. That is provided for by the Oil Taxation Act.
Our new proposals in the Bill are designed to ensure that a payment on account will be made by the oil extracting companies when they submit their accounts—in other words, by 1 March and 1 September in each year. Payment of PRT will therefore be accelerated by two months. If Parliament enacts the Bill, the first payment under the new regime will be in respect of the accounting period from 1 July to 31 December 1979. It will bring the payments of PRT into line with the royalty regime, because royalties are paid two months after the end of each six-months period.
The new regime is more rigorous than the corporation tax regime because corporation tax is paid nine months after the end of a company's accounting period. It will also be more rigorous than the schedule D income tax regime since that tax is payable on 1 January and 1 July following a tax year, although the payment is based on the preceding year's profits.

Mr. T. H. H. Skeet (Bedford): Why, if in normal circumstances payment of income tax is one year later and of corporation tax nine months later, will the time for PRT payment be reduced to two months?

Mr. Rees: That is a perfectly fair point. I do not think that my hon. Friend has quite taken the point on income tax,


because under case 1 or case 2 of schedule D income tax is payable on 1 January in the course of the year to which it relates and on 1 July thereafter. The PRT regime will therefore be, as it is at the moment, more stringent than the income tax regime, but I am not certain that that is an entirely fair measure of comparison.
The regime that we have so far operated and that which we now propose is not more rigorous than the regimes of other oil-producing countries. In Nigeria, Oman and Abu Dhabi, payments are made during the course of the year. In Malaysia and Brunei, part is to be paid during the course of the year and part thereafter. In Norway and the United States, payments are normally made by four instalments during the course of a year, although on estimated amounts.
By comparison with what other oil-producing countries are doing, therefore, our proposals are not over-stringent although, no doubt, in due course my hon. Friend will, if he gets the chance, deliver his usual powerful address about the difficulties that the oil industry is facing. I certainly remember my hon. Friend's interventions in the debates last summer on the increases in PRT that we then introduced.
If the House passes the Bill, £700 million will be brought forward from 1980–81 into the current financial year 1979–80. In addition, £300 million will be brought forward into 1980–81. So as to show the effects of this provision in its true context, I should explain that the previous estimates for the current year were that the Government would receive royalties of £520 million, PRT of £730 million and corporation tax from the oil companies of £140 million. The provision will therefore make a substantial contribution to the Government's cash flow. I could weary the House with many other statistics but I do not propose to do so unless pressed.
I hope that it will be accepted that our proposals conform with the assurances given by Mr. Edmund Dell when he was speaking on the original Oil Taxation Bill in 1974. He indicated then that it was important that the rate should endure and that it should not be a matter

for fine tuning. His words were echoed at that time by my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin). I should stress in that context that nothing that we are proposing in the Bill is designed to alter the quantum of the oil companies' liabilities. The Bill is designed purely to accelerate the payments of PRT to which they would in any event have been liable.
I do not think that I need weary the House with further details at this point. With your permission, Mr. Deputy Speaker, and that of the House, I hope to speak again to deal with any points that arise during the debate and that require an answer.

Mr. Denzil Davies: I do not know whether the Minister of State is proposing to summarise the clauses, but, if he is not, will he say something about the statement that the oil companies will have to deliver to the Board of Inland Revenue under clause 1(1)(a)? What is to be the nature of that statement?

Mr. Rees: The proposal is that the oil companies should deliver a statement, within two months of the end of the accounting period, giving a computation of their liability to petroleum revenue tax. That is set out in clause 1. Should they underpay tax because they have underestimated the liability, under clause 2 the oil companies will be subject to interest at 9 per cent. However, if the oil companies have been over-generous and have over-calculated their liabilities, interest will be payable on the tax repaid to them.

Mr. Davies: Does that mean that the Inland Revenue will accept a statement as it stands and not challenge assessments made by the oil companies?

Mr. Rees: It is difficult to make a detailed challenge within two months of the end of an accounting year. To that degree the Inland Revenue will depend on the accuracy of the oil companies' estimate. The companies must produce an account at the end of the period. There can be no absolute accuracy in these matters. However, there will be a sanction. Interest will be payable if the liability is underestimated. If more expenses are allowable tax will be repaid with interest. That sanction has applied up to now.

Mr. Dick Douglas: Have we not achieved, through complicated techniques—including the use of computers and micro-electronics—a high degree of accuracy in estimating the flows of oil and gas from the production platforms? Is not the allowance pretty generous either way?

Mr. Rees: I hope that it is generous. I like to believe that our tax regime is reasonable and generous. It is possible, to a degree, to monitor the extraction of oil. However, it is a question not only of the volume of oil that is extracted but of complex calculations of uplift, oil allowance, and so on. I do not pretend that absolute accuracy will be achieved by the oil companies, or even by the Inland Revenue, two months after the end of an accounting period. It will be a slightly rough and ready regime. There will always be scope for recalculation. If the oil companies under-calculate, there will be the sanction of the interest that they will have to pay—and that is non-deductible. If the oil companies are over-optimistic and underestimate their allowable expenses, tax will be paid to them with interest. I hope that the broad balance that we always hope to find in our tax system will be struck. That is in the interests of the oil companies and of the Government, through the Inland Revenue.

Mr. Skeet: Will altering the period trigger off the payment of interest at 9 per cent. at an earlier date?

Mr. Rees: We can deal with that in Committee. Clause 2 deals in some detail with interest. Currently, interest is paid at the end of a four-month period. Although an account must be submitted two months after the end of an accounting period, the tax becomes payable four months after the end of that period. Interest provisions are geared to that four-month gap, but under the Bill they will be geared to a two-month gap. There is much technical fine print in clause 2 and I have no doubt that my hon. Friend the Member for Bedford (Mr. Skeet) will want to examine it in detail if he is lucky enough to be made a member of the Committee. We have shortened the period to two months.
If any other points arise in the debate, with your permission, Mr. Deputy

Speaker, I hope that I may deal with them. I hope that I have explained the purpose and main provisions of the Bill. I commend this useful and modest measure to the House.

Mr. John Garrett: When the Chancellor of the Exchequer announced this measure on 15 November to require oil companies to make payments of PRT on account so as to advance the date of collection, he said that it woud reduce the public sector borrowing requirement by £700 million this year and thus bring the PSBR back to the original Budget level of £8·3 billion. He said that it would also ensure that the PRT reached the Exchequer with the minimum of delay when oil prices increased.
We had an extensive discussion on the PSBR in the debates on 28 November and 5 December. In the course of those debates the PSBR was proved to be an elusive concept. It has been maintained that there is no public deficit at all, but a surplus. It has been said that at a time of declining economic activity the PSBR inevitably will rise, in spite of the Government's policy of progressively reducing it. It is not clear whether the target is still £8·3 billion, or 4½ per cent. of GDP, which amounts to £9·5 billion.
Confusion was worsened by the observation of the Chief Secretary that the PSBR figure had to be adjusted in "real terms". We could conclude only that he meant that it must be indexed in some way when the policy was to reduce it year by year. It is clear that this measure will make an increased contribution to the Exchequer and thus to the PSBR. It is as well to bear in mind that the real burden falls upon public services, employment, the standard of living and the quality of life, the community at large and particularly the poor.
The alteration in the payment of PRT has the advantage of achieving three PRT payments in the 1979–80 fiscal year instead of two. When the Government made their announcement, BP was reported as saying that it would not be affected to an embarrassing extent and that it was not an insuperable problem. Shell said that it would make little difference.
The Times of 16 November reported that the general attitude of the oil companies was that the Government were being reasonable. However, the companies feared that as a result of the 100 per cent. increase in oil prices over the past 12 months, and the certainty of further oil price rises, an increase in the rate of North Sea taxes might be made in the 1980 Budget.
The history of PRT is one of the Government continually trying to catch up with the profits of companies operating in the North Sea and usually lagging well behind. Given the enormous profitability of oil companies and the prospect for further massive increases in profits consequent upon the rise in world oil prices, it is not clear that we have caught up with them yet. Calling for this advance payment seems to be an expedient, but it leaves open the major question whether our community is receiving its fair share of the profits gusher in the North Sea.

Mr. Gordon Wilson: The hon. Member for Norwich, South (Mr. Garrett) asks whether the community is getting its fair share. Does he not admit some complicity on the part of his party in the previous legislation, under which the level of PRT was fixed at too low a rate?

Mr. Garrett: The origins of PRT lie in a report from the Public Accounts Committee in 1972–73. The Committee considered whether there were adequate financial arrangements for securing for the Exchequer and the economy a fair share of the results of the exploitation of North Sea oil and gas. It concluded that though the major oil companies incurred worldwide tax of thousands of millions of dollars, hardly any of that money found its way to the United Kingdom Exchequer. That was because their liability to United Kingdom corporation tax was extinguished by credits for tax paid elsewhere.
If that situation continues, the United Kingdom can expect little tax from the profits of the continental shelf, even by 1980. The Committee concluded that unless a new tax regime was introduced the United Kingdom would not obtain anything like the share of the take of oil companies' operations on the continental shelf that other countries were obtaining from oil found in their territories. The Committee called for Government action

substantially to improve the tax yield from North Sea oil and gas.
The Times report on the PAC said that it revealed a horrifying story. It said that the British taxpayer, investor and worker had lost unnecessarily and that a national asset had been given away. The then Chancellor of the Exchequer, Lord Barber, said in March 1973 that the situation was no longer justifiable. He referred to artificial losses incurred by oil companies from their trade in other parts of the world which they used to offset against British tax.
During the Second Reading debate on the Oil Taxation Bill setting out the principles of petroleum revenue tax, in November 1974 Conservative spokesmen—notably the right hon. Member for Wanstead and Woodford (Mr. Jenkin)—attacked the concept of PRT. They said that the Treasury was greedy for cash and that smaller oil companies might be driven to the wall. However, after consultations with the oil companies the then Paymaster General announced safeguards for marginal fields, including the discretionary waiving of royalties, an oil allowance per field of 1 million tons per year free of PRT to a cumulative total of 10 million tons, and a safeguard waiving PRT if the charge reduced the rate of return on a field before corporation tax to less than 30 per cent. of capital expenditure on a historic cost basis. In addition, capital expenditure by companies qualified for an uplift of 75 per cent., making an allowance of 175 per cent. of capital spending before the tax was levied.
The rate of PRT was fixed at the surprisingly low level of 45 per cent.—the bottom end of Treasury forecasts. The rate had been widely expected by the industry to be 60 per cent. or more. When that was announced, the right hon. Member for Wanstead and Woodford doubted whether the reliefs were adequate and would be enough to restore confidence in an industry that had been badly shaken by the introduction of the Oil Taxation Bill.
There was no sign of shaken confidence in the industry. Oil shares rocketed, and the Petroleum Times of 7 March 1975 said that oil companies could chalk up another victory. It contrasted the soft deal that had been obtained from the


British Government with the tough time that those companies were having at the hands of OPEC Governments. During the Committee stage of the Oil Taxation Bill the Conservative Opposition fought hard for the oil companies. The right hon. Member for Wanstead and Woodford asked whether the Government were aware of the damaging blow to confidence that PRT had caused. He asked the Government whether they were aware of the grave risk that PRT might drive firms away from the United Kingdom continental shelf. However, the fears of the Conservative Party were not realised. By 1978 the tax had been proved to be too favourable to the oil industry and had to be substantially tightened up.
In August 1978 my right hon. Friend the Member for Heywood and Royton (Mr. Barnett), who was then Chief Secretary, announced new rates and allowances for PRT. He said:
we are in a position to take stock and it is apparent that some companies are obtaining very large profits from the natural resources of the nation. We believe that the public share of these profits can and should be increased without endangering the exploitation of the less well placed fields."—[Official Report, 2 August 1979; Vol. 955, c. 754.]
He proposed to increase the rate of PRT from 45 per cent. to 60 per cent. on 1 January 1979 and to reduce the uplift for capital expenditure from 75 to 35 per cent. He also proposed to reduce the oil allowance from 1 million tons to 500,000 tons a year.
The right hon. Member for Bridgwater (Mr. King), then an energy spokesman for the Conservative Party, was fairly scathing. He maintained that the increases in revenue would add only something under 10 per cent. to the present yield. He said it would have little effect on major discoveries that had already been made but would be very damaging to smaller discoveries that were likely to make up the bulk of future discoveries in the North Sea.
A study by Odell and Rosing of the profitability and output of the Forties, Piper and Montrose fields said that the improvement in Government revenues would be less than 12 per cent. over the life of a field, and that even that depended on the assumption that all corporation tax from a field's development would be

paid and not postponed as a result of new investment elsewhere in the North Sea.
The then Chief Secretary's reason for raising PRT and reducing allowances against it was that the balance had been wrong between the public interest and the return to the companies. Clearly the present Government agree that the balance was wrong, because they have implemented the proposals of my right hon. Friend.
The right hon. Member for Bridgwater at least welcomed our belated recognition that North Sea oil revenue was likely to fall below estimates. He questioned whether even the proposed tax changes went far enough for the most profitable fields. Calculations reported in the Financial Times of 4 August 1978 and based on the proposed tax regime—adopted by this Government—showed that the discounted cash flow rate of return on BP's Forties field would be 42·5 per cent., on Shell /Esso's Auk field 52·9 per cent., and on Occidental's Piper field 49·1 per cent. For smaller fields, returns were significantly lower—Amoco's Hutton field return represented 22·4 per cent. and Phillips' Maureen field 14·7 per cent. These calculations provided the basis for oil industry protests about the raising of the tax. All those calculations were carried out in August 1978, when the new PRT proposals were announced. They were made on the basis of oil being $14 a barrel, rather than the price levels of today of around $23 to $26 a barrel.
The Government adopted our proposals for reducing the allowances against PRT and implemented them in this year's Finance Act. We now have a proposal to bring PRT payments forward. However, we must still ask the key question: are there adequate taxation arrangements for securing for the Exchequer and the community their due share of profits from the exploitation of the assets of North Sea oil and gas, particularly in respect of the largest and most profitable oilfields?
Oil companies operating in the seas round Britain have a uniquely favourable economic and political environment. The Financial Times of 4 August 1978 said:
There is hardly anywhere in the world where companies could find such an attractive combination of oil producing potential, a stable political regime and comparative freedom of operation and profit-making.


In addition, those companies are producing some of the most valuable oil in the world. Due to its lightness, and therefore its suitability for refining into high-value products, and its low sulphur content, that oil commands a premium price and is exceptionally profitable.
We still have some problems in assessing the yield from PRT. That yield was nil until the end of the 1978 financial year. For 1978–79 the yield was estimated at £170 million by my right hon. Friend the Member for Heywood and Royton. He estimated an additional yield, arising from his changes in the tax, of £150 million in 1979–80. The Treasury's economic report of last August forecast the revenue from PRT for 1979–80 at £730 million. The present measure increases that by £700 million. The Minister has told us that tonight, but even he appears unsure whether the take will be based on the estimates given by the oil companies.
When the Labour Party was in power, Conservative hon. Members complained that while the Government produced five-year expenditure forecasts they produced revenue forecasts for only one year. They said that it was reasonable to ask the Treasury for at least an indication of the expected revenue from PRT for the coming five years.
Given the effect of world oil prices on oil company profits, those questions become yet more important. The oil companies are on a never-ending profit escalator. The issue appears to be much more widely discussed in the United States than in Britain. Last month Exxon announced that its profits had more than doubled to $1·1 billion in the July to September quarter. Texaco announced a quarterly profit increase of 211 per cent. Standard Oil of Ohio announced a profit increase of 194 per cent. and Conoco announced an increase of 134 per cent. One reason for Exxon's spectacular profit increase was said to be a one-time bonanza of $200 million from a change in British tax law. Perhaps the Minister can explain whether that claim has any validity.
Profits in Europe were said by American oil companies to be the main source of their windfall profits. President Carter has proposed a windfall profits tax on the oil companies to produce $292 billion in revenue over the next 10 years. The

President warned that he would introduce punitive legislation against the oil companies if the Senate failed to produce a tax Bill that he considered to be tough enough. The American Council on Wage and Price Stability, beginning an investigation of profit margins on oil products, alleged that only half of product price increases were due to higher crude and product costs. The rest was due to profits by the oil companies.
A few days ago British Petroleum declared third quarter profits of £562 million—described in The Guardian as "embarrassingly large". Cumulative profits for the first three quarters came to £1,184 million, as compared with £292 million for the first three quarters of last year. That increase by BP was attributed to a 60 per cent. increase in crude oil prices in nine months. Indeed, industrial analysis points to the direct correlation between crude oil prices and oil company profits.
I spoke earlier of crude oil prices at levels of $23 to $26 a barrel, but spot market prices are reaching $40 a barrel. A week or so ago the National Iranian Oil Company demanded $50 a barrel for some oil that had been put on the spot market. NIOC also announced a cut of 5 per cent. in deliveries for the last three months of 1979, and other countries are considering reductions. OPEC meets in Caracas on 17 December. Already Algeria and Libya have pushed their prices beyond the ceiling set by OPEC in June, and it is thought that the official OPEC ceiling could go to $25 to $30 a barrel this month. Ten years ago, that oil would have commanded $3 a barrel.
The outlook is for ever higher crude oil prices and ever higher oil company profits. On the workings of this tax, it is clear that an important feature is allowable expense. That is a matter of negotiation between the companies and the Inland Revenue. What scope is there for the transfer of costs from pipeline to production so as to minimise PRT on production? Parliament has no access to these negotiations, yet the technical complexity of the production systems must make for an imbalance between the negotiating parties. I shall refer later to President Carter's call in his energy plan for complete openness in all tax assessments of oil company operations.
In respect of a limited number of oil companies not competing with each other and working in a highly complex tax-cost-price situation and with many international aspects, should not Parliament know more about the processes of tax assessment? We know that the Government are in favour of increasing open government, as we can see from their decision to drop the Protection of Information Bill. Apparently that Bill had been drawn up by civil servants and was more repressive of information than the Ministers had intended.
For example, to what extent has the collection of this tax been delayed by difficulties facing the Inland Revenue in assessing allowable expenditure or by delays in the provision of the information from a multiplicity of fields and operators? We know of lengthy disputes between the United States Government and the companies on the cost of pipeline transport from the Alaska oil fields.
Much more fundamental questions on oil taxation, including PRT, are raised by a report placed in the Library of the House in July by the present Minister of State, Department of Energy. This report, entitled "The development of oil on the United Kingdom continental shelf", was prepared for the Department of Energy by Professor Peter Odell when he was an adviser on oil policy to the last Government. Professor Peter Odell is a widely acknowledged international authority on oil matters and a consultant to international bodies.
The Odell report reconsiders the entire question of the system of concessions and taxation used by British Governments in respect of North Sea oil. He considers the present arrangements
basically a system in which all the positive initiative—except the granting of the concessions in the first place—lies with the companies, to whose actions the Government can respond only in a neutral or a negative way. It is, moreover, a system in which the State's collection of revenues from the exploiters of the resources is seen as a 'burden' on the company. In other words, it is a system which, in politico-economic terms, hardly seems compatible with the concept of the national ownership of a country's oil and gas resources.
On the question of taxation, the Odell report says:
Oil pricing is a key element in determining tax liability. This is because the price declared (received) for the oil produced determines the value on which PRT calculations are based and

of course, it also helps to determine corporation tax liability. However, the nature of the world oil market is such that the value of oil which is not sold at 'arm's length' is not an objectively determinable element. The market for oil is essentially one of negotiated transfer prices (between company and company of the same or of different groups and between companies and Government in respect of most OPEC and some non-OPEC oil-producing countries) in which the value of a barrel of oil to one company is different from its value to a second or third company. Similarly, the value attached to a barrel of oil is different as between companies and Governments.…In this sort of situation, almost all Governments depending on or expecting revenues from oil production have found…in order to safeguard Government revenues it became essential for a set of tax reference prices to be unilaterally determined by the Government as the sole means of valuing the oil produced. Such tax reference pricing is required in respect of the United Kingdom's oil production to replace the valuation procedure as set out in the Oil Taxation Act of 1975 for, although this Act allowed the Inland Revenue to substitute its assessment of market value for that declared by the licensee in respect of sales between affiliates, this can be challenged on appeal by the company concerned: a situation which must inhibit the valuation assessment by the Inland Revenue.
The report goes on:
The evaluation and the incidence of costs is, of course, also critical for the tax calculations—as recognised in the Oil Taxation Act of 1975 and its Schedules. Yet we do not, and indeed cannot, know if it is being monitored/controlled effectively as the question of allowable costs in respect of specific operations for a specific oil company is a confidential one for determination by the Inland Revenue alone on the basis of the general rubric whereby secrecy for individuals' tax returns is maintained. Is it reasonable in respect of the very large revenues expected by the Government from a limited number of companies, which have been specifically allocated rights by the Government to exploit the nation's oil resources, in the context of a highly complex technico-economic situation with many international aspects, that the tax assessment should be a secret one?…In his 1977 Energy Plan, President Carter insisted that there must be openness in the evaluation of the oil companies' responsibility for paying taxes.
In a very telling passage, the report concludes:
If the United States, with its relatively much lower degree of financial dependence on the oil tax-take, with the relatively much higher degree of domicility in that country of the oil companies concerned, and with its much longer experience of trying to tax oil companies effectively, thinks that the oil companies must be subject to special rules over tax assessments, then the need for such a requirement in the case of the UK appears to be almost self-evident.
Finally, the Odell report examines the case for greater emphasis on royalties and


considers the case for a wholesale change in concession and taxation agreements to a basis of production sharing between the Government and the companies in which bids
should not be for a concession to explore for and to produce oil on the basis of the success (or otherwise) of which the company making the bid will eventually pay taxes (as well as relatively minor sums in respect of lease rentals etc). Instead, the company will bid for the right to retain a share of the production of any oil which it discovers and produces.
All of these questions raised by Professor Odell are important, especially in the context of a review of oil taxation. In a statement reported in The Oilman of 14 April of this year, the right hon. Member for Bridgwater, then an Opposition energy spokesman, said:
Britain's North Sea licensing and tax policies will be reviewed once again if a Tory Government is elected on May 3.
On taxation, he claimed that Labour's policies were
cobbled together in a hurry without any consultation as a gimmick for the election from which they shrank in October.
He said that the Tories would not over-tax marginal oilfields and would work
to restore the confidence of the oil industry in the fair dealings of British Governments.
On that point, he said:
It needs a clear assurance that there will not be countless changes in the rules, and that there will be full consultation. As a possible means of reducing the uncertainty we shall examine whether a more predictable formula could be incorporated in the tax system to take fuller account of changes in the real price of oil and in interest rates, without the need to introduce further legislation on each occasion.
Here we are with more legislation. So much for the pledge to avoid changes in the rules. We should like to know whether the rest of that statement holds good—that the Government are reviewing oil taxation—and, if so, to what purpose. Is it to reduce PRT on smaller fields, as they have always insisted they would? Is it to boost further the confidence of the oil industry? Do the Government think that the balance between the public and the oil company interest is right? Or is the proposal that we are discussing simply cobbled together in a hurry?
We are now operating the third tax regime for North Sea oil and gas. The

first, up to 1975, produced the prospect of minimal tax revenues for the nation as a result of the exploitation of this resource. That was the day of the give-away. In those days, of course, the prospect was for a low price of oil, enormous costs of exploration and production in the North Sea and the possibility of a price collapse which would make North Sea oil of doubtful value.
The second tax regime, from 1975 to 1979, at a time of rapidly rising oil prices, produced a low tax return, though this was expected because of the heavy initial tax allowances. But clearly, on the basis of forecasts of future revenues, the Labour Government thought that PRT was at too low a rate and that the allowances against it were too advantageous to the oil companies. We now have the present tax regime, still in operation for only a few months, but now against the background of a wholly unforeseen rise in oil prices and little prospect of an amelioration in their level.
Are oil companies in Britain getting over the garden wall with their windfall of golden apples, as they are alleged to be doing in the United States, because our taxation in general and PRT in particular is insufficiently effective? Clearly the Government now believe that the oil companies could make a greater contribution to the Exchequer. At least, now they are casting around for a means of reducing the public sector borrowing requirement. The conversion is welcome, though the cause is of doubtful validity.
The Conservative Party has always been resolute in defence of the oil companies—those poor, misunderstood, beneficent enterprises. It has tended to believe the protests of the oil companies that our taxation damages their confidence. What does the Minister of State say to the issue raised by the Public Accounts Committee seven years ago and as valid today as it was then? Are the Exchequer, the economy and the community receiving a due and fair share of the benefits of this great, irreplaceable natural resource? Future generations may put us on trial on this question.

Mr. T. H. H. Skeet: We have heard, as we expected, a speech from the hon. Member for Norwich, South (Mr. Garrett) depicting the industry


as one which was buoyant but which was not making its necessary contribution to the Exchequer.
The hon. Gentleman was right to indicate that the price of oil has risen. Prior to 1973, it was about $2 a barrel. In the first instance, it rose to $11 a barrel. Today in Saudi Arabia, with the market crude 43API, it is of the order of $18. It is about to rise again. But let it be known that a State corporation in the United Kingdom was quite prepared to advance the price, even against OPEC, to $26 a barrel here.
Let it be understood by people who may not have followed the hon. Gentleman's argument that the Government's take is 80 per cent. of the profits of the oil companies and that, if one adds royalty, the figure rises to 84 per cent. Left with the companies, therefore, is the difference between 84 and 100. Let it be recognised also that the cost of equipment in the North Sea has risen by leaps and bounds. What is more, the companies, including the BNOC, are expected to operate in very much deeper water.
Before I leave that argument, I ask the hon. Gentleman to consider the price of oil. I advise him to read schedule 3 to the Oil Taxation Act 1975. The schedule sets out at length that the oil companies are paying exactly the base that the Government anticipated.
The Labour Government set the public sector borrowing requirement at £10 billion. However, due to Budget remissions of £1·2 billion and payment shortfalls of £0·7 billion, the total came to £11·9 billion. The Budget target for the public sector borrowing requirement is £8·3 billion. If we subtract that target from the £11·9 billion, we are left with £3·6 billion. That is the reduction that the Government require. Of that, the oil industry is expected to contribute no less than 42 per cent. to 44 per cent. If we include the transfer from the national oil account in October 1979, the figure is as high as 50 per cent.

Mr. Denzil Davies: Does the hon. Gentleman agree that the Government do not have much of a clue as to how much money they will get in this year? The Minister of State has said that that is dependent on the accounts submitted by the oil companies. It may suit them

to submit a low figure and to pay the extra interest.

Mr. Skeet: A calculation has been made. As reported in Hansard on 4 December 1979, my hon. and learned Friend stated that he expects royalties of £520 million and as much as £730 million from PRT. It is quite clear what he expects to obtain from this source. It is more difficult to calculate the revenue that will be obtained from other sources.
The contribution that is coming from the North Sea is giving me the impression that the Labour Government were saying and the present Government are saying "If their revenue is buoyant, let us take it all away from them." That is the wrong rationale for the future.
The Budget raised petroleum revenue tax from 45 per cent. to 60 per cent. In 1979–80, that contributed £110 million. The forward sales of oil to be delivered in 1980–81 by the BNOC, largely to local refiners, are between £400 million and £500 million. The sale of a 5 per cent. interest in BP—for example, 80 million at £3·63 pershare—has provided another £290 million. Accelerated PRT payments under a House of Commons resolution of 5 December 1979–we now have the Bill—has brought another £700 million. If we add the transfer of a £300 million surplus from the national oil account to the Consolidated Fund in October 1979, the total is well in excess of £1·16 billion.
It is apparent that the oil industry, of which BNOC is a part, is being milked to enable the Government to lower the public sector borrowing requirement. I agree that the Government wish to control the money supply. I also agree that that is important. However, should the oil industry have such a heavy burden put upon it?
We were taught by the previous Government, and we are being taught by the present Government, that North Sea revenue is required for the rejuvenation of British industry. I see little indication of that in performance so far. I have always advocated that a separate fund should be established for North Sea payments to prevent them from being dissipated on current spending as opposed to capital account.
The statement on monetary policy was made on 15 November 1979. The Bill


was published on 6 December 1979. That was last Thursday. Second Reading is now being taken, on 10 December. We were given precisely two working days to examine the Bill's implications. It is extraordinary that the Government expected the Bill to pass through the House in one day. However, its passage is to be divided. We shall probably deal with its concluding stages next week. Is it right to break the traditional practice of the House that gives us two clear week-ends before we have a debate on Second Reading?
There is no urgency. It would have sufficed if the Bill had come before the House in late February 1980. Surely it would have been desirable for the Bill to make a later appearance in view of all the technical problems that are raised. There has been no opportunity for consultation with anybody in the industry. Surely it would have been satisfactory to consider whether the Provisional Collection of Taxes Act 1968 provided a suitable route that should have been followed.
It is worth bearing in mind the debates that took place when this matter was considered in 1975. When the Oil Taxation Bill 1975 was being considered in Committee, my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin), who is now Secretary of State for Social Services, moved a new clause that read:
Section 1 of the Provisional Collection of Taxes Act 1968 shall apply to this Act; and accordingly, in subsection (1) of that section after the words 'income tax' there shall be inserted the words 'petroleum revenue tax'.
If the Labour Government had been wise enough to foresee that requirement, it probably would have been totally unnecessary to introduce the Bill. However, the Labour Government did not use their judgment and my right hon. Friend's new clause was rejected.
There have been three milestones in the treatment of the oil industry in recent years. I regard them as three millstones because they have been dragging the industry down. The Oil Taxation Act 1975 brought in the new tax regime. Sections 18 to 22 of the Finance (No. 2) Act 1979 have raised the rate of tax from 45 per cent. to 60 per cent. The uplift was reduced from 175 per cent. to 135

per cent. That was secured at a time of rising interest rates. Record levels have been reached. The uplift was a form of compensation, 75 per cent. of it being compensation for not allowing interest to be deducted. The third millstone is that the oil allowance was reduced from 500,000 long tons to 250,000 metric tonnes. A limit of 10 million long tons was reduced to 5 million metric tonnes. A similar provision was made for gas. Within four months we have the Bill.
My hon. and learned Friend has said that the rate should endure and that the Government have made no attempt to alter the quantity of tax that the companies are expected to pay. However, it was only four months ago that the rate was increased from 45 per cent. to 60 per cent. Therefore, he can say that with the greatest assurance.
The period of grace for payment has been reduced from four months to two months. What is the next possibility? Is the period to be reduced to one month? The chargeable periods are six months. I have already received an answer that is out of line with many other payments. Schedule D and corporation tax have been mentioned, but they are applicable to longer periods. Is the next steps to reduce chargeable periods to three months?

Mr. Gordon Wilson: Hear, hear.

Mr. Skeet: One of the principal arguments that should be balanced against the Bill is that PRT is being used as a short-term economic regulator. That is not appropriate for a fundamental tax. It is appropriate to consider the words of the right hon. Edmund Dell when the Oil Taxation Bill 1975 was being considered in Committee. The then Opposition spokesman was my right hon. Friend the Member for Wanstead and Woodford. I quote the words of the Minister. It is an edifying statement, which reads:
The industry has emphasised again and again the importance to it of some assurance of stability in the rate of tax, that it will not be used for demand management purposes nor as a short-term regulator. The right hon. Gentleman referred to that, and I have been at some pains to assure the industry that we intend this to be a stable tax and not as a short-term regulator…there is no intention here that this should be anything other than a stable tax, which will not be used for demand management purposes nor as a short-term regulator.

Mr. John Garrett: Surely the case is that the rate of tax was not increased by the previous Government for use as a short-term regulator of the economy. They did it simply because they had got the figure wrong—they were not raising enough money.

Mr. Skeet: On this occasion it is being used in the Bill as an economic regulator. It is bringing into account in this year an extra payment to the Government of £700 million. They require it desperately as they want to reduce the public sector borrowing requirement. On that basis, the end justifies the means. The end is reasonable, but are the means right? The Minister of State may say that he is not bound by what Mr. Dell said. My right hon. Friend the Member for Wanstead and Woodford said in that same debate:
I, too, want to stress on behalf of the Opposition what the right hon. Gentleman said about the manifest undesirability of a tax of this sort, which is solely for revenue raising purposes in a specific circumstance, being used in any sense as a short-term regulator. He and I both know that we cannot bind our successors, whoever they may be. I say this with, so far as I can do it, the full authority of the Opposition Front Bench."—[Official Report, Standing Committee D, 6 February 1975; c. 727–30.]
If the Government and the Opposition indicated at that time, in 1975, that PRT would not be used as a short-term economic regulator, why are they using it in 1979 for just that purpose?
It is ironical that the industry, after having experienced such a change, was told that there would be stability in the rate of the tax. That was altered and was used this year to provide additional moneys. There was cutting back on companies' liquidity. In those circumstances, they may ask whether that will give confidence.
If I may be so immodest as to make a quotation from my own speech on Second Reading of the Oil Taxation Bill on 27 November 1974, I said this:
What I fear is this: the petroleum industry may be quite prepared to concede the lion's share of the profits it is likely to make from the North Sea. It may well be in the vicinity of 80 per cent.…
I fear that the petroleum industry will become a veritable Gulliver, tied down by the Lilliputians of Whitehall; in the end they may be unable to operate successfully and instead of extracting the oil from the North Sea it will be left there because of constant slippages

in the programme."—[Official Report, 27 November 1974; Vol. 882, c. 516.]
That certainly occurred during the period of the Labour Government.
I ask this question about the Bill: why was it not termed the Oil Taxation (Amendment) Bill to amend section 2 and the second schedule to the Oil Taxation Act 1975, especially as clause 3 mentions that the Act and the Bill are to be construed as one? I can only come to the conclusion that when we move into Committee the Government want the clause to be narrowly drawn so that amendments are limited.
I also ask why the Bill was not called the Finance (No. 3) Bill to cover several anomalies in PRT. May I mention several of those? Extending petroleum revenue tax to cover the windfall profits of the British Gas Corporation would be satisfactory now. From answers to parliamentary questions, I discovered that under the Gas Act 1972 there is no way in which the Government can transfer the windfall profits of that industry over to the Consolidated Fund. Therefore, this is an opportunity which has now been missed. Probably it has gone for some time.
For the purpose of PRT, expenditure should be deductible during the period covered. It is allowed only when it is agreed with the Inland Revenue—and there are long delays. That is another matter that could be rectified.
There are also problems with the national oil account.
There are technicalities which I must indicate to the House. Allowance for expenditure is descretionary, but the assessment of PRT—of income—is not. Unfortunately, under section 2(9) of the Oil Taxation Act 1975 the basis for allowances is not what is spent but what the Inland Revenue allows. The Revenue may defer matters which come within certain areas for a time, creating problems for the responsible person—that is, the claimant or the participator.
Paragraphs 2(4) and 2(6) of the schedule to the Bill relate to allowances of expenditure other than abortive exploration expenditure. Schedule 6 to the 1975 Act is similar but relates to a claim by a participator. Schedule 7 relates to activities for abortive exploration. Schedule 8 relates to allowances for


unrelievable field losses. They are treated as having been allowed, but only for the purpose of making a payment on account. Subsequent disagreement by the Revenue will leave the issue unresolved to be carried forward to a further charging period, but interest will run after two months instead of four as now.
Accelerated PRT payments under the appeals system are unsatisfactory. There is no right of appeal until a negative decision—an unequivocal decision—on expenditure claims has been made. Thus, if the matter is left in abeyance there is no appeal procedure. Yet the date of appeal is relevant for tax and interest calculation purposes, as under schedules 2 and 5 to the 1975 Act items allowed on appeal are regarded as allowed for the period during which the appeal was made.
These matters are of some importance. They have all been introduced under this Bill. It is right that they should be pursued when the matter goes to Committee, albeit for a short period.
This industry has been successful in the North Sea. We must count among those involved the BNOC, which under a recent Act must pay PRT. Are all these companies—including the State company and British Petroleum, in which the State has a large investment, and including the British Gas Corporation, which is 100 per cent. State-owned—to be bled because the land is in difficulties, because people are not prepared to work and because of other difficulties that have supervened? Why put all the burden on the one successful industry? I make a plea that in future the Government—when they go ahead with a project of this size, small as it may be—consider having consultations with the industry before they attempt to put such a measure on the Statute Book.

8 pm

Mr. Gordon Wilson: The Bill is an example of the tinkering that has been taking place in the oil taxation structures that have evolved over the past 10 years. As the hon. Member for Norwich, South (Mr. Garrett) said, until 1974 very little had been done by way of preparation for the taxation of the windfall values of oil in the North Sea.
I am probably one of the few Members here, at least in terms of the speech made by the hon. Member for Norwich, South, who are blameless in relation to the level of taxation. During proceedings on the 1975 Bill I endeavoured to get the rate of PRT increased from the then 45 per cent. to 75 per cent. I was shot down for my pains by the Treasury Bench, which, since then, has had to confess that it made mistakes all the way through.
I agree with the hon. Member for Bedford (Mr. Skeet) about the way in which the taxation resources are being used by the Treasury. We have here an example of a short-term expedient to reduce the public sector borrowing requirement, but at the end of the day the revenues which are accruing will go to swell the general mass of taxation going into the Treasury. Many hon. Members on both sides of the Chamber wanted a capital fund set up to make sure that this capital asset was used for future benefits and development. A good example can be found in legislation passed by the Province of Alberta to make sure that the benefits from its oil and gas were passed on to future generations. Unfortunately, we do not have that provision.
I want to ask the Minister of State some questions about the Bill and its impact. In a parliamentary answer on 4 December to the hon. Member for Norwich, South there is reference to the calculation of estimates of revenue—royalties, petroleum revenue tax and corporation tax—totalling £1,390 million. If I heard correctly, the Minister is keeping to that estimate, but that estimate is for the financial year to the end of March. I should like to know what the total amount of additions to revenue will be by the advancement of payments. If there are benefits other than those by reduction of PSBR, will the Minister spell them out?
In another parliamentary answer on 5 December, in reply to the hon. Member for Grimsby (Mr. Mitchell), who
asked the Chancellor of the Exchequer whether he will circulate in the Official Report the effect, in terms of the real and the money economies, of bringing forward the payment of £700 million of petroleum revenue tax".
the Minister of State, in a somewhat elliptical answer, said
The bringing forward of PRT payments will have no immediate effect on output. It will directly reduce the PSBR in 1979–80. The


resulting effects on the money supply depend on how the oil companies finance the payments. It is likely that they will reduce to some extent their holdings of liquid assets including their bank deposits, and that the money supply will therefore be reduced. In the longer term, the reduction in the PSBR and rate of monetary growth will contribute to reducing the rate of inflation which will be beneficial to private sector output."—[Official Report, 5 December 1979; Vol. 975, c. 214–5.]
I ask the Minister to expand on that answer and to indicate the revenue advantages to the Treasury of getting its income ahead of schedule as advanced by this legislation.
In that connection, if I understood the percentage of interest correctly, the rate of interest to be charged on moneys not payable by the oil companies will be 9 per cent. That seems a good way for the oil companies to retain more money if they have to pay out only 9 per cent. in view of the current minimum lending rate. Will the Minister indicate why he has chosen 9 per cent. rather than 17 per cent., which is the current MLR, or, indeed, any figure between 9 per cent. and 17 per cent., which was adopted more recently?
The taxation structure in connection with North Sea oil has been full of holes for many years. Only recently the chairman of the Inland Revenue, Sir William Pile, admitted to the Public Accounts Committee that tax evasion by employees, both British and foreign, working in the United Kingdom sector of the North Sea was costing the State £10 million to £20 million in lost revenue annually. He said that the rate of evasion of tax had now reached £50 million to £60 million.
According to a statement in the most recent edition of The Oilman news bulletin, the Norwegians have managed to patch up these evasions, and tax officials in Stavanger have indicated that they have the continental shelf under control. That is a different kind of taxation from the one with which we are dealing in the Bill, but will the Minister indicate what the Revenue is proposing to do about the millions of pounds of tax being lost?
I think that the time has come for an overall review of the oil taxation structure. In the debate on the Finance Bill on 10 July, the hon. Member for Bedford indicated that the whole structure should be reviewed. The Minister of State then said that that would introduce an element

of uncertainty against which long-term investment and development were not feasible. That was in July. Of course, he has now produced another Bill, which, even though I accept its contents and the advantage of bringing forward payments of tax, thereby bringing us into line with other oil-producing countries, shows some volte-face on the part of the Minister of State, in that he is prepared to keep on tinkering with the system and to cause uncertainty that way. In view of the remarks made by the hon. Member for Norwich, South, perhaps he would agree to a complete review of the taxation structure.
In this respect, I refer to the latest edition of Energy Economics, for October 1979. From page 224 onwards, Mr. Alexander G. Kemp and Mr. D. Crichton conduct an analysis of the effects of the July changes on different fields. They say:
It is found that the new tax scheme will considerably alter the structure of the tax burden and will increase the overall tax take. Marginal tax rates will also increase, not least for some fields with low expected returns. The new scheme will, however, continue to favour capital intensive exploitation techniques.
They go into a substantial computer analysis of the set-up and point out that in a computation of PRT the factors that determine the variable effects, which are quite complicated, are the size of the field, the timing of the exploitation of a field and the profitability of a field. They say:
The legislation was designed to obtain more revenue from the large, profitable fields.
In the tables that they present, they found indications
that for the Forties and Piper fields (which must have been the main ones in the UK government's thinking) this objective is to some extent likely to be achieved. Thus the total tax bill on the Forties field is increased by $895 million or 4·8 per cent. in nominal terms. In real, present value, terms the increase is 6·4 per cent. It is interesting to note, however, that the expected increase in revenues is proportionately greater from a field such as Dunlin which is being developed at a later date than Forties. The increase in total government revenue from Dunlin is 6·4 per cent. in nominal terms and 9·2 per cent. in real, present value, terms.
There we have an example where one of the more recent and less profitable fields will end up paying a higher proportion of the tax bill.
Again, looking at PRT changes and profitability, they have considered the effect of the changes on marginal fields. They saw, again from tables that they had computed,
that the Heather field can expect an increase of 1·86 per cent. in its total tax bill in nominal terms while the Cormorant and Argyll fields should escape any net increases. This net result conceals some other influences at work.
They then bring in the fact that oil allowances at certain stages have a considerable impact.
This article is most interesting because of the critical way in which it looks at the existing PRT structure. It says
As a result of all these factors the overall tax take has not only generally increased but there is now more variety in tax burdens across fields which is not always directly related to profitability. This variation is especially pronounced in real, present value, terms. The fields which are being exploited relatively early will not suffer such a large increase in their tax takes as those being developed later, when the disadvantages of the reduced 'uplift' in oil allowance will be more keenly felt. This effect is exhibited by the case of Dunlin and Murchison whose tax take becomes greater than that of the more profitable Forties and Piper fields.
I could go on at greater length quoting the analysis that has been made, but it seems to me that the time has come for a more critical look at the whole structure with which we experimented—if I may use that term—in 1974–75. We experimented with a new structure, although there were plenty of examples to be found for the rest of the oil-producing wells that we could have adopted with less difficulty than has perhaps come to light.
It is a pity that the Government have not seen the opportunity to announce an overall review. There are deficiencies in the tax regime. I dispute what the hon. Member for Bedford said, namely, that the oil companies are being hit adversely. The profit figures that those companies are producing certainly suggest that their shoulders are immensely sturdy. Surely, if the economy is running through difficulties it is those with the broadest shoulders who should bear the heaviest part of the burden. I have no hesitation, therefore—having seen the figures that were announced for stock appreciation profits, which are very ruthlessly enjoyed by the oil companies every time the price of oil increases—in placing additional domestic burdens on their shoulders.

Mr. Skeet: I am not seeking to defend the oil companies, but the return on capital investment for the oil companies is virtually 11 per cent. or 12 per cent. in their worldwide operations. A lot of exploration has to be done elsewhere, and nothing that they can draw from the North Sea in the way of profits can be utilised. That is for the purpose of tax because of the ring-fence operations. What I am suggesting is that we must get some facts right before we start plundering industry.

Mr. Wilson: I most certainly agree that we must get the facts right, although I suspect that when it comes to the interpretation of those facts there will be several views about what they mean.
My main contention is one that I hope the hon. Member for Bedford will accept, from his point of view, that after five years of experimentation of petroleum revenue tax with the peculiarities and anomalies that each change throws up, and the effect that this might have on marginal fields in particular, the time has come for a cooler look at the structure to see whether we can change it, whether marginally or radically, to make sure that it is fairer in its impact on the given fields, and above all fairer in respect of the people whom we represent.

Mr. Peter Viggers: I was interested in the comments of the hon. Member for Dundee, East (Mr. Wilson) about ensuring that we obtain a fair return from oil companies. My principal concern is quite different. We should use these finite resources in a manner that will ensure that they give benefit to future generations and not just to our own. I am far less concerned about being fair to oil companies than I am about being fair to future generations.
I must declare an interest, which is known to those who have been involved in energy debates. For many years I have had a connection with an oil company that pays a small amount of PRT. The amount is very small compared with the size of the company, which principally operates overseas, but it is right that I should declare that interest.
As my hon. and learned Friend the Minister of State knows, I am one of his greatest admirers. I believe that we could substantially reduce the public


sector borrowing requirement by selling tickets for the Gallery when he is due to make a speech in the House. He is well known for his wit and the manner in which he inserts the dagger between the ribs. Nevertheless, this evening I wish that my hon. and learned Friend was not here but at home with his carpet slippers in front of the television set or, perhaps, in his case, chewing tin tacks, gargling with sulphuric acid and sharpening up with a few more mental gymnastics, because—my hon. and learned Friend knows my view—this subject concerns energy and oil and we should be shaping the regime on petroleum revenue tax having regard to our concern for the long-term depletion of our energy resources and not because of any short-term demand or need by the Treasury. The value of the assets that we have been given in the North Sea is immeasurable. The way in which we have so far measured up to our stewardship of these assets is, in my view, deplorable.
Let us look at the record and what has happened so far. My criticism is impartial of Governments. Looking back, I see that on 15 December 1976 the previous Chancellor of the Exchequer said in his Budget speech:
There is one further step which we propose to take to reduce the public sector borrowing requirement".
He went on to say:
We now…intend to sell some shares in British Petroleum."—[Official Report, 15 December 1976; Vol. 902, c. 1532.]
The then Chancellor of the Exchequer made it clear that he intended to do that to reduce the public sector borrowing requirement.
Similarly, on 28 March 1977 the then Secretary of State for Energy, the right hon. Member for Bristol, South-East (Mr. Benn), when talking about gas prices, said in reply to a question:
I think that any increase in prices is regrettable, but my hon. Friend will know that this increase derived from the necessity to reduce the public sector borrowing requirement in connection with the IMF loan."—[Official Report, 28 March 1977; Vol. 929, c. 3–4.]
So again we have another use of our energy resources to give the Treasury another financial shot in the arm.
It goes on. On 14 September 1979 we had had a change of Government but we

had the same policy. The Secretary of State for Energy, my right hon. Friend the Member for Guildford (Mr. Howell), when talking about the British National Oil Corporation and saying that he intended to arrange payment in advance from the sale of some of the Corporation's oil, went on to say in a press statement:
This will reduce the Corporation's financing requirements, and so help the Government to meet its public sector borrowing requirement.
Again—the Treasury spokesman is very keen on this particular phrase—on 5 November 1979 my right hon. and learned Friend the present Chancellor of the Exchequer said during his statement on monetary policy:
further action is required to bring the PSBR down. In the light of this, we shall require oil companies to make a payment on account of petroleum revenue tax at the time when they make their returns… The Bill to achieve this will be introduced shortly. It will reduce this year's PSBR by 700 million and thus bring the estimated level back to the orginal Budget figure of £8·3 billion. It will also yield an extra £300 million next year, in addition to £400 million or so from the deferred payment of telephone bills."—[Official Report, 15 November 1979; Vol. 973, c. 1514.]
So we bracket the development of the North Sea with the payment of telephone bills.
I feel very strongly on this subject. The development of the North Sea is a subject of great importance, the like of which this nation has not seen since the Industrial Revolution when we developed our coal and other resources. It really requires us to bring a mature and long-term judgment to it. I certainly do not oppose this proposal that the Government now bring forward. I support it. In terms of what it seeks to do it is fine, but it is right that we should give more thought to energy planning on a long-term basis.
As an immediate issue we should—as was mentioned in the dialogue between the hon. Member for Dundee, East and my hon. Friend the Member for Bedford (Mr. Skeet)—look at the effect of this measure upon the oil companies, because they do the work in the North Sea. We should look at their profitability, their rate of production and their rate of exploration. My view is that the companies are well able to withstand a further impost at this time. I do not question that.
What we as a House and as a nation should be looking at, and in a completely different way, is the way that we want the exploration and production profile in the North Sea to proceed. We must find out, decide and discuss the profile of exploration and production and what it will do to the reserves that we have left in the North Sea. The key question is: how can the Government encourage the degree of exploration that will enable us to delineate the fields so that we know what there is in the North Sea yet at the same time hold back on production so that there are resources left for our children and our children's children?

Mr. Skeet: My hon. Friend has already declared an interest in an oil company. Would he, as a director, be interested in putting more money into development in very deep waters in the North Sea if he were told that twice in a year the Government had altered the rules of the game and that they would probably alter them again?

Mr. Viggers: In spite of the view implied in my hon. Friend's question, my conversations around the world with those involved in the oil industry lead me to believe that the United Kingdom is an attractive sector for the operation of oil companies. I think that that remains so. For representatives of any oil company to seek to give the impression that the British Government are behaving less than properly by changing tax rates is simply disingenuous. These things happen. I therefore take issue with my hon. Friend on that point.
What is the Government's plan? There are those who say that planning is impossible because there are too many imponderables. This is a massive subject, and one which it is almost impossible to shape up to in some ways—hence perhaps the attendance at debates on this important subject—but I refute that view.
There is another view, that if we can give free rein to the oil companies and the gas development companies, to those involved in energy, private market forces will bring forward new types of energy, and that we do not need to worry because even if the oil runs out at the end of the century those private enterprise forces will bring forward alternative energy

sources. It is said that that is the way that the market works.
That view also I must refute. Oil and gas resources are finite. Even that statement needs to be qualified to some extent, because at the moment we leave about 50 per cent. of the oil in the ground, and if we brought on new production techniques more oil and gas would become available, and if the price went up enough it would be worth developing new resources which at the moment are not worth developing.
Nevertheless, the clear statement is true, with qualifications, that the resources are finite. I am reluctant to see finite resources used at speed. Oil is part of our heritage, like our land, and we must have a policy of conservation which limits its exploitation. The worst of all worlds is to use energy as a kind of milch cow—or whatever the equivalent is for hydrocarbons: I am sure that the Minister of State will know the exact mot juste—to benefit the British people on a short-term basis and to be milked whenever the Government need another financial shot in the arm.
Tax is part of the planning of the development of the North Sea—along with physical limitation of development. Those are the two pillars of the Government's policy towards the North Sea, and I think that the planning of tax should fall largely within the regime of the Department of Energy. Therefore, I should like to express some thoughts on planning. First, the oil and gas are, with limitations, finite. Secondly, it is impossible to overestimate the fragility of the oil supply and demand picture at the moment.
Who would have thought, two years ago, that the situation in Iran would develop as it has? A fortiori, who would have thought two months ago that it would be possible that it would take two whole weeks for the Saudi Arabian forces to expel some insurgents from the world's largest mosque? Pondering these things shows the fragility within these regimes and the risk now facing world supply and demand.
Thus, although some oil will be found, it is unlikely that it will supplement to a considerable extent the oil currently being developed, and it is unlikely that oil which is discovered will be produced as


cheaply as present resources. Taking this chain of logic, the conclusion must be that the price will increase.
There will, of course, be bumps in the upward pattern—perhaps the price will drop on the spot market for a while; perhaps, on a very long-term basis, someone will invent the energy equivalent of the wheel and energy prices will come down—but, subject to those things, the price will go up.
One should bring some judgment, then, to the rate at which we should be developing our oil and gas resources. My own completely subjective judgment is that we should be restricting our production to about the level that we currently need in the United Kingdom. Of course one could argue and quibble with that. The hon. Member for Dundee, East would no doubt have a view about the amount that should be devoted to Scotland as opposed to elsewhere in the United Kingdom, but my personal view is that we should take roughly self-sufficiency as a pattern and that that is less likely to be wrong than most other ways of developing our oil and gas.
I see that it is now projected that Britain will be a net exporter of 5 million long tonnes of oil in 1985. That is wrong and should be reconsidered. To export oil in that quantity will of course improve our balance of payments in the short term, but that means that the value of sterling will rise and we shall make ourselves less competitive in other fields. That is exactly the Dutch disease. We should reconsider that export intention.
Moreover, despite all that has been said by Governments, despite all the pious platitudes, there is so far no sign at all that the benefit of North Sea oil is being used as capital and for capital replacement. It seems to continue to be used as income. Unlike any prudent citizen or commercial company, the Treasury in its wisdom does not distinguish between capital and income: it muddles them all up together.
The faster we exploit our oil resources, the greater is the risk that the North Sea inflow will distort our economy. Of course we need to preserve our supplies of oil at a certain level, and the Government's duty is to tread a careful path between conservation and inspiring confi-

dence, which will allow oil and gas to continue to be developed.
Then—very much last in my list of priorities—comes the question of the tax take, the amount that we should be trying to recover from North Sea operations. I believe that the proposal in the Bill is a neat and elegant way of introducing a windfall tax. It is nicely conceived. It makes the minimum alteration to the present pattern, and from my own study of the rate of PRT and the uplift provisions and allowances I think that the draftsman who dreamt up this way of producing this tax should be congratulated.
However, in congratulating the Government on the Bill, I must say that we cannot go on much longer without a more comprehensive statement of the way in which we intend to use our North Sea oil resources. Governments have continued to pay lip service to the need to plan, but as I have shown, the practice is ad hoc all the way.
As a short-term measure, the Bill should commend itself to the House. It is entirely suitable and appropriate, but the big question is, where do we go from here? I hope that the more long-term and fundamental points which have been raised today will be taken on board by the Government. We cannot go on much longer without a clear statement of their intentions over the use and challenge of our North Sea oil.

Mr. Dick Douglas: I do not intend to follow the hon. Member for Gosport (Mr. Viggers) in the generality of his remarks, but I should like to deal with one or two matters raised by him and other hon. Gentlemen.
Hon. Members on the Government Benches are in difficulty. They have to decide whether to support a Government who want to reduce and/or contain the public sector borrowing requirement, and whether to support a Government who foolishly and imprudently embarked on tax changes, including cuts in income tax. The Government have allocated a certain flow of funds and have to find a way of replacing that flow to the Exchequer, and they are raking around to do that.
There is £500 million from the sale of oil forward by BNOC, and it is extremely difficult to discover the exact


terms of that sale and whether it is in the national interest. This Government have shares in a winner and it is foolish for them to sell the shares in BP. The public's shareholding is being crucified on the cross of holding down the PSBR and fulfilling the Tory Party's dubious economic and fiscal election promises.
I share some of the concern of the hon. Member for Gosport. This is a simple little Bill, designed to accelerate the payment of petroleum revenue tax, but, as I have indicated, it is born out of a specific need of the Government. Although in itself the Bill might be considered harmless, the attitude manifest in it is extremely harmful.
Taxation of oil and operations of companies in the North Sea can be examined under two broad headings. Here I am indebted to the thinking of Christopher Johnson in a recent issue of "Fiscal Studies". A system of taxation can be devised that maximises gas and oil exploration in keeping with an agreed production depletion profile. On the other hand, the Government take in the short run can be maximised, to the detriment of the industry as a whole and the reserves. The present system does neither. It is a piecemeal system of stops and starts, particularly in regard to exploration. A tax revenue system that is ostensibly designed to obtain a Government take of over 70 per cent. in the life of a field is felt by many distinguished observers to produce only a take of under 60 per cent. Those are matters for debate and discussion.
However, I share the view of the hon. Member for Gosport and may be in conflict with my Front Bench. I apologise to my hon. Friend the Member for Norwich, South (Mr. Garrett), who made an excellent speech. The Government's first duty on energy is to ensure security of supply over the longest possible period, particularly for indigenous resources.
We have presented to the House a production profile that shows that over a few short years we shall have an excess of supply over demand, particularly for oil, but that will come to an end around 1985, and the production pattern is being determined now. The question of crucial importance is, how is the Government's tax system designed to extend the production profile, particularly for oil and gas? It does the Minister no credit to

produce this little Bill without indicating how it relates to security of supply.
With respect to my Front Bench, I take a firm view. We have had a decline in exploration activity in the North Sea over the past few years. The Government have come forward with another 70 or so blocks and there is likely to be a slight upsurge in exploration activity, but there is no indication that a system is being devised that will bring into production, post-1985, the smaller fields that have to be exploited to secure in particular the supply of oil for this nation.
The Minister knows that I have raised this matter in the House before. In my view, he has given inadequate replies. The system that we now have lacks progression in terms of the size of the field. The hon. Member for Dundee, East (Mr. Wilson) indicated that it lacks progression and sophistication in relation to the profitability of the field. The system mitigates against companies with only one field. As a whole, it benefits companies with a number of fields. They are able to offset capital expenditure from the less profitable fields against corporation tax paid, or probably payable, on other fields.
Other nations have a much more sophisticated system. The Norwegians in particular graduate royalties and graduate tax in relation to the size of the field. We know that it is difficult for any Government to keep abreast of the actvities of the oil companies. We know that oil companies are adept at tax avoidance. They employ extremely skilful accountants and pay them, rightly or wrongly, extremely high salaries. Governments are therefore at a disadvantage in trying to ensure tightness in the tax regime.
The major reason for lack of buoyancy in the revenues from the North Sea is related to delays in fields coming into operation. A second reason is the pound-dollar exchange rate and a third is the high level of inflation in this country. Government policies overall affect certainly two out of three of those items. My hon. Friend the Member for Norwich, South and others have spoken of the escalation in the price of oil internationally. The OPEC nations are due to meet in a few days' time. Some months ago I said, perhaps fool-


ishly, that I would not take bets against a $30 barrel of OPEC oil by the end of the year. I do not know whether I shall be right. I suspect that I shall not be far wrong in suggesting that the price will be around that figure.
We also know what has been happening in the spot market. When a question was asked a few months ago about the amount of oil going on to the spot market, we were told that it was about 5 per cent. or 6 per cent. Nowadays, we are not sure whether 5 per cent. or 15 per cent. of oil is going on to the spot market. That oil is being sold at anything between $40 and $45 a barrel. One of the reasons for the take-up of the huge surplus of tankers is that there are more tankers at sea than ever before. We have an international rat race in terms of oil and the future of the world's economy. This revolves around the international oil market. No Government can afford to stand back and see these windfall profits accumulate to the companies.
Governments have to take action. I beg the Minister to inform the House when this Government intend to make a statement of taxation policy designed over a period of time—say, between now and 1990–to secure supplies, particularly from our own indigenous resources.
One of the most noisome aspects of what is happening is that we are pillaging the future. If ever there were a case for a definable fund to which the flow of resources was clearly identified, that case is made for setting up a national oil fund. I disagreed with my own party on this issue. I thought it essential that the nation should see the flows from these finite resources going to a fund that they could use purposefully to regenerate British industry. That was my considered view.
Now, unhappily, I see the Government of the day using these resources for short-term political gain. The Government must take a view between now and the next election. Governments of all colours do it. I hope that the nation as a whole will look further than the next election in terms of judging how we are wasting and misusing these resources.

Mr. John Garrett: With the leave of the House, Mr. Deputy Speaker, I should like to speak again.
This has been an interesting, short debate on a crucial question. We shall no doubt return in Committee to a number of the questions which have been raised.
I ask the Minister of State to enlarge on his reply to my right hon. Friend the Member for Llanelli (Mr. Davies) on the Government's aim to secure an extra £700 million this year as a result of the proposal to accelerate the payment of the tax. It seemed to us that it was far from certain that the Treasury would realise such a sum. It is not necessarily true that it will be able to cover its telephone bills as a result of the measure.
Is the Treasury certain that that is the sum that it will realise in the coming year? Is it reviewing the oil taxation system? As my hon. Friend the Member for Dunfermline (Mr. Douglas), the hon. Member for Dundee, East (Mr. Wilson) and other hon. Members pointed out, we need a review of the oil taxation system to balance the need to secure supplies and to maximise the tax take.
The hon. Member for Bedford (Mr. Skeet) said that the Government's take of profits would be 85 per cent. Is that correct? I seem to recall that the forecast for the 1975–79 tax regime was that the take would be about 75 per cent. but that calculations showed that in the event it was about 59 per cent.

Mr. Skeet: Were royalties included in that?

Mr. Garrett: No. Excluding royalties, it was about 59 per cent.
The hon. Gentleman spoke of taxation as milking, even plundering, the industry. How different the debate in this country is from that in the United States! There it is clear that the bulk of opinion, from President Carter through the rest of the community, dwells particularly upon the windfall profits of the oil companies and the need to secure a fair share of those profits for the community. I also understand that in respect of the Groningen gas field in Holland the Dutch Government have introduced a windfall tax taking up to 95 per cent. of the profit. If the Minister of State could give us an idea of what he expects the incidence of the tax to be, in terms of what percentage of the profit will be taken, we should be very pleased.
Are there problems in the assessment of allowable costs? Are there inordinate delays in collecting the tax as a result of assessing allowable costs? No doubt in Committee we shall seek more details on the statement of the tax payable by the companies, referred to in clause 1(1)(a), and the computation set out in the schedule, which will certainly take us some days to master, the Bill only recently having been published.
In principle we are not opposed to the Bill, although we have doubts about a Conservative Government's ability, or willingness, to secure the greater return for the country out of the profits of North Sea oil and gas, given their hostility at any time when Labour Governments tried to secure a fair share for the community when introducing taxation.

Mr. Peter Rees: The hon. Member for Dunfermline (Mr. Douglas) was disposed to describe this as a simple little Bill. I do not dissent from that description. My hon. Friend the Member for Bedford (Mr. Skeet) complained that the House had not had sufficient time to consider all the Bill's implications. I apologise to the House if it is felt that there has not been adequate forewarning of the debate, but my right hon. and learned Friend the Chancellor of the Exchequer mentioned on 15 November that there would be such a Bill and stated clearly what the Bill's objectives were. The Inland Revenue published a press notice which, I hope, gave a clear idea of what would be contained in the Bill.
I hope that when the House has had the chance to digest the details—there are only three clauses and a schedule—my hon. Friend the Member for Bedford, with his customary assiduity, will be able to master it in its full complexity. There will be ample time for discussion in Standing Committee.
I will do what I can to clear up any of the knotty points that were raised during the debate. The hon. Member for Norwich, South (Mr. Garrett), who obviously devoted a considerable amount of thought to this problem and to the whole history of oil exploration in the North Sea—I congratulate him on the profundity of his research—posed the fundamental question which must exer-

cise any Government, of whatever political complexion. The question is whether we have adequate tax arrangements to secure a proper share for the country of the revenue from oil reserves in the North Sea. I do not ignore the point raised by my hon. Friend the Member for Gosport (Mr. Viggers) that we must consider that question but that we must also have a long-term view of how North Sea oil should be exploited.
My hon. Friend has been honourably consistent in propounding his view. I recall that we had a debate 15 or 18 months ago about how the revenues from North Sea oil should be spent. My hon. Friend made his point then and I am sorry that we have not matched his expectations. I have been pressed from both sides of the House to say what the Government's depletion policy is. It may be that this is not the moment to deploy that policy in its full glory. I am not certain whether, even if it were in order for me to do so, I could deal with the question to the total satisfaction of the House. It is perhaps a matter for my right hon. Friend the Secretary of State for Energy, and I am delighted to have my hon. Friend the Minister of State, Department, of Energy supporing me on this occasion.
However, I am not certain that this Bill touches on the question of a depletion policy. The Bill is designed for one purpose only. Nor do I believe that it poses the essential question asked by the hon. Member for Norwich, South. Both the questions to which I have referred are legitimate in the context of a debate on petroleum revenue tax.
It has been asked on both sides of the House whether we have a windfall profits tax such as is being discussed in the American Senate. We should not be shy of our own system of petroleum revenue taxation. We do, after all, take a royalty and corporation tax. If we are looking for a windfall profits tax, I would say that this is it. My hon. Friend the Member for Bedford is pressing me on this point. He believes that we already have too onerous a windfall profits tax. This is the difficult question that I encountered last summer and will, no doubt, go on encountering as long as I am defending the position of the Government from this Dispatch Box. On the one hand, I am told that we are being too


demanding and, on the other, I am, told that we are not taking enough. That leads me to conclude that perhaps the balance is just right. I am not complacent about this. There cannot be certainty in this context, because it is a matter of subjective judgment. Who can say what proportion we should be taking? For the benefit of those who want to know, let me say that I am told that the Government's take from the broad average of undiscounted profits, with royalties, corporation tax and petroleum revenue tax taken into account, is about 75 per cent., and the marginal rate is 83·5 per cent.
Again, this is a matter for debate. Some hon. Members might say that we should be taking 90 per cent. I know that that would not satisfy my hon. Friend the Member for Bedford, who would say that it should be 70 per cent.

Mr. Douglas: Will the Minister be good enough to disclose the basis of these calculations? Are the figures calculated on the basis of one field or a range of fields?

Mr. Rees: I can reassure the hon. Gentleman at once. They are calculated on the basis of a range of fields. There is, of course, an element of speculation in these figures, but that is the best estimate that we have been able to make.
Against that background, the Opposition may say that we should be taking 90 per cent., but we are conscious of the other considerations. Attractive as we hope the North Sea is and will remain for investment, there must nevertheless be a basic incentive for the oil companies, which can be light of foot. They have only limited capital and limited expertise. If we press them too hard, they may choose to deploy their endeavours in Mexico or wherever else it might be—I know not. These are matters of fine judgment. It is easy for the Opposition to say that they would adopt a different regime.

Mr. Skeet: I am sorry to intervene, but will my hon. and learned Friend concede that the taxation which he is getting from royalties, PRT and corporation tax is £1·4 billion, and it does not stop there? He is taking something also from the motorist in petrol taxation—50 per cent. of the cost of petrol. When he has taken all this from the industry and from con-

sumer sources, he is receiving a very large part of his revenue, is he not?

Mr. Rees: I am certainly prepared to concede that a considerable contribution is made to the British Exchequer, but I do not know that I want to mix up the take from the consumer, from the motorist, with the take from the producer in the North Sea. There are slightly different considerations involved.
The hon. Member for Norwich, South pressed me about Exxon's one-time bonanza. I think that it would be improper for me to go too deeply into the affairs of any one company, although I recognise that the hon. Gentleman makes the point that all its tax returns should be, as it were, face upwards on the table. It has been a long-established tradition in the British Revenue that the taxpayer's affairs should be confidential, and there are good reasons why that should remain so.
As I understand the Exxon position, the company was in fact referring to stock relief, which, of course, is not peculiar to oil companies but spreads right across the board. I think that that is all that there was in mind, although I am not privileged to see into the company's mind.
The hon. Gentleman asked me a question about allowable expenses. This is a difficult and technical matter. It is not, as I think my hon. Friend the Member for Bedford suggested, purely discretionary. There are rules. There can be arguments on questions of fact, but the broad framework is laid down as a matter of law, and the oil companies have a right of appeal. One important point which I should make—perhaps it is well known to the House—is that these expenses are allowed only against the revenues of any particular accounting period when they are agreed with the Inland Revenue. So it may well be that they are not allowed against an accounting period to which, on an accountancy view, they are attributable.

Mr. Skeet: They are carried forward.

Mr. Rees: They are carried forward, but they will not be lost. Reverting to what was said by the hon. Member for Norwich, South, I agree that this is a difficult area, but the framework is there. There is not, as it were, a total administrative discretion, but there is obviously always room for argument.
I hope that the House will forgive me if I re-emphasise that we are not here debating the Government's take or the quantum of the oil companies' liabilities. All we are concerned with here is to advance the Government's take.
I was pressed from several quarters—by the hon. Member for Norwich, South and his hon. Friend the Member for Dunfermline as well as by the hon. Member for Dundee, East (Mr. Wilson)—to say whether the Government were reviewing oil taxation. Of course, these matters are under constant review. Before I am told that that is the usual bland Treasury answer—I know the kind of point that is made—let me add that I do not see that there is a case for a fundamental overhaul and review.

Mr. Gordon Wilson: That cuts no ice.

Mr. Rees: While it may not cut any ice with the Scottish National Party, I hope that it will cut ice with the rest of the House, and in particular the hon. Member for Norwich, South. His former right hon. Friend, Mr. Edmund Dell, who had much experience and carried much weight in this field, gave an assurance to the oil companies, which was affirmed by my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin), now Secretary of State for Social Services, that there would not be constant chopping and changing. We wanted to try to devise a framework that would be broadly right. But we were moving into a novel field. Mr. Dell and my right hon. Friend emphasised that, particularly if the price went up, we would have to look again at the rates.
That was the justification for the new package announced by the previous Administration in August 1978. It was also our justification, which I hope I explained to the satisfaction of the House in June and July of this year, for adopting it. We thought that it might have been a little harsh in the context of what was happening in August 1978, but the package was overtaken by events. I hope that the House will not press me to speculate on what may emerge at Caracas. That is not within my powers.
We want to keep the framework so that there is an assurance of stability in the North Sea. There can be no absolute assurance if the prices go through

the roof that the rates cannot be reconsidered. The House will recall that when we debated the Finance Bill my right hon. Friend the Secretary of State for Energy said that he was setting up a review of marginal fields. I hope that that will reassure the House. To a degree we are considering the impact of our taxation policies on the marginal fields, but that may not completely allay the worries of my hon. Friend the Member for Gosport. He would like the Government to undertake a far more fundamental review. It is not that I do not wish to cross swords with him, in or out of carpet slippers, but I am not certain that such a modest Bill is the right measure by which to open up the area to which he rightly continues to draw our attention. Perhaps my hon. Friend the Minister of State, Department of Energy is a more appropriate person to debate that issue with him.
Various questions were put to me by the hon. Member for Dundee, East. He asked me to give esimates for 1979–80. I think that I gave them, and indeed the hon. Member for Norwich, South gave them. The royalties will be £520 million. The original estimate of petroleum revenue tax was £730 million. To that must be added the £700 million which we hope will be accelerated. There can be no certainty in such matters. Finally, there will be corporation tax, excluding advance corporation tax, of £140 million.
The hon. Gentleman asked whether the interest on arrears of tax—or, conversely, the interest on tax overpaid—is too low. The point that may have escaped his attention is that the interest payable by an oil company in arrears with tax will not be deductible for tax purposes. The net amount is different from the gross amounton a minimum lending rate.
We are considering the problem of avoidance or evasion of tax in the North Sea. The avoidance or evasion is not by the oil companies. It is perhaps by people who work for them. That is a matter that is engaging our attention, but I am not in a position to anticipate—and it would be wrong of me to do so—the Budget of my right hon. and learned Friend the Chancellor.
The hon. Gentleman also suggested an overall review of the tax structures. I hope that he will accept the points I


made, although he will probably not agree with them entirely. He used that engaging phrase that used to trip so easily from the lips of the right hon. Member for Leeds, East (Mr. Healey) about "broad shoulders". It is not for me to say who has broad shoulders in or out of the North Sea, but we take his point.
The hon. Member for Dunfermline referred to the sale of BP shares. I do not know whether that arises on this Bill. The dispersal of a Government shareholding that no longer is of importance for security reasons will not be taken amiss by the country. It is a good thing for our fellow countrymen to have the chance to invest directly in the North Sea. The action should be viewed from that point of view, and if it makes a modest contribution to the country's finances it can be commended on that basis also.
The hon. Gentleman and others suggested that there should be some special fund into which North Sea revenue should be paid. That is, of course, attractive on the face of it, though whether it would quite meet the point made by my hon. Friend the Member for Gosport I do not know. I will leave my hon. Friend and the hon. Member for Dunfermline to debate that on another occasion. The difficulty will then be to define the purposes for which that fund will be used. Labour Members are apt to say that it should be used for capital purposes, and the hon. Member for Dunfermline suggested using it for the regeneration of British industry. That is an attractive phrase, but I am not absolutely certain that on rigorous analysis that would turn out to be a capital project. If it proved to be an annual subvention to certain major industrial companies, would that necessarily be regarded as a capital project? I am not certain that that formulation does not raise as many problems as it solves.

Mr. Gordon Wilson: I accept that there might be some difficulty in establishing a division between capital and revenue, but most of us here are concerned that without provision for any such fund the money would be frittered away. I can give two examples to support my argument. The first concerns the Shetland Islands council, which has set up a fund to maintain the economy of the islands

after the main oil development work has passed. The second example concerns Alberta in Canada, which is very rich in oil and gas. It has established by statute a heritage fund which it intends to use to help the economy of the province after the oil and gas begin to run out.

Mr. Rees: Mention of a heritage fund evokes an echo from these Benches. The heritage fund that we have sought to establish is not the same as the one mentioned by the hon. Gentleman in Alberta. I think that ours is of a somewhat more limited kind.
These are interesting suggestions I will not fob the hon. Gentleman off with the Gladstonian answer that this is not the way that we construct our accounts. I have always had slight reservations that in Government one does not make distinctions between capital and revenue. To me as a mere lawyer, as, perhaps, to other hon. Members with accountancy experience, that sounds a rather heretical view. I do not know whether it would be for the convenience of our debates if we did have a hard and fast fund of that sort, but it is for hon. Members to press on the Government of the day that we should divert more attention to capital investment. That opens up the whole interesting debate on Government expenditure and Government expenditure plans. I hope that hon. Members will forgive me if I do not cover that ground again. Important points of principle arise, but I am not certain whether they arise on this modest measure.
I commend the Bill to the House on the basis that it conforms with the assurances given by Mr. Dell and my right hon. and hon. Friends when petroleum revenue tax was devised. We are not tinkering with the structure of the tax, which remains as it was conceived. We are not tinkering with the rates of the tax, although no assurance was given that the rates would remain immutable for all time. Obviously, they must be conditioned to a degree by prices obtaining. We have advanced the payment of PRT, and in doing that we are putting it on roughly the same basis as the royalties. We are not putting ourselves out of line with the countries that I instanced in my opening remarks which have more rigorous regimes.
I have tried to tiptoe between the strictures of my hon. Friend the Member for Bedford and of the hon. Members for Dunfermline and Dundee, East. The Government have probably got it about right. We shall be happy to examine details in Committee. I agree that there are many technicalities. I hope that we can derive a measure of comfort from the broad measure of agreement and common ground that has been identified during the debate.

Mr. Skeet: May we have an undertaking that we shall not move into Committee unless we have a reasonable time to consider these matters and until the Treasury has had the opportunity to conduct realistic negotiations with the industries involved? Are we to use all the North Sea revenue from royalty and other sources in current lift? Is that permanent Government policy, or is that policy intended to last for only a short time?

Mr. Rees: I would hate to say that the Bill is a short-term expedient, because it is not. We believe that it should be a permanent encrustation on the framework of PRT.
I am sure that it will not take a person with my hon. Friend's resources and agile mind more than a day or so to master the intricacies of the Bill. I am not saying that the Government will ask a Standing Committee to consider this in a day or so. I am sure that the timetable will not tax my hon. Friend or those who advise him so well. However, I shall bear in mind what he says. There will be ample opportunity for him and others who are interested to give the Bill full and proper consideration.

Mr. Viggers: Will my hon. and learned Friend take his mind back to when he was talking about the distinction between capital and income? Is it part of Government policy to seek to find ways of eradicating current expenditure and to try to retain the more important parts of capital expenditure? If that is Government policy and the Treasury adheres to it, would it not be thoughtful and worth while to make a statement to the nation about how North Sea funds are spent? That would enable the Government to fulfil their aim of swinging expenditure from current to capital projects.

Mr. Rees: That is an awesome challenge to accept even from a perceptive hon. Friend. I am not in a position to give assurances tonight about the scope and range of Government expenditure over the life of this Parliament. My hon. Friend the Member for Gosport will have noted what my right hon. Friends have said in recent debates on public expenditure. I take my hon. Friend's point. I shall not fob him off with technicalities such as saying that I personally would like to see a system of double bookkeeping in Departments.
My hon. Friend asks a fundamental question. However, this is not the time for me to proffer a major commitment on public expenditure. That is a little out of the range of my responsibilities. I take note of what my hon. Friend says, as, I am sure, will my right hon. Friends.
I can understand why the problems that I identified alarm my hon. Friend the Member for Gosport, because in the short term they are current expenditure and cash flow problems. However, on reflection my hon. Friend will recognise that to give a major commitment on public expenditure is more than my narrow shoulders can bear on this occasion. I hope that we shall be able to return to that issue on a more appropriate occasion.
I think that I have established a measure of common ground that seemed to elude me for a minute. I hope, without being presumptuous, that I have manoeuvred the House back to the Bill and that the House will approve this modest measure.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

Orders of the Day — EUROPEAN COMMUNITIES

Resolved,

That the draft European Communities (Definition of Treaties) (Multilateral Trade Negotiations) Order 1979, which was laid before this House on 5 December, be approved.—[Mr. Parkinson.]

Orders of the Day — HIGHLANDS AND ISLANDS AIR SERVICES (SCOTLAND) BILL

Order for Second Reading read.

Ordered,

That the Bill be referred to the Scottish Grand Committee.—[Mr. Le Marchant.]

Orders of the Day — HOUSE OF COMMONS MEMBERS' FUND

Resolved,

That, in pursuance of the provisions of section 3 of the House of Commons Members' Fund Act 1948, the maximum annual amounts of the periodical payments which may be made out of the House of Commons Members' Fund under the House of Commons Members' Fund Act 1939, as amended by the said Act of 1948 and by the Resolutions of the House of 17 November 1955, 7 March 1957, 17 May 1961, 9 March 1965, 4 May 1971, 1 August 1972, 29 November 1974, 27 November 1975, 8 November 1976, 30 November 1977, 6 December 1977 and 30 November 1978, be varied as from 1 December 1979 as follows:

(a) for paragraph 1 of Schedule 1 to the said Act of 1939, as so amended, there shall be substituted the following paragraph: —

1. The annual amount of any periodical payment made to any person by virtue of his past membership of the House of Commons shall not exceed £1,440 or such sum as, in the opinion of the trustees, will bring his income up to £2,655 per annum, whichever is the less: 
Provided that if, having regard to length of service and need, the trustees think fit, they may make a larger payment not exceeding £2,780 or such sum as, in their opinion, will bring his income up to £4,000 per annum, whichever is the less;

(b) for paragraph 2 of the said Schedule there shall be substituted the following paragraph: —

2. The annual amount of any periodical payment to any person by virtue of her being a widow of a past Member of the House of Commons shall not exceed £720 or such sum as, in the opinion of the trustees, will bring her income up to £1,935 per annum, whichever is the less: 
Provided that if, having regard to her husband's length of service or to her need, the trustees think fit, they may make a larger payment not exceeding £1,390 or such sum as, in the opinion of the trustees, will bring her income up to £2,605 per annum, whichever is the less;

(c) in paragraph 2A of the said Schedule for the words 'the annual amount of any periodical payment' to the end of the paragraph, there shall be substituted the words—
'the annual amount of any periodical payment made to any such widower shall not exceed £720 or such sum as, in the opinion of the trustees, will bring his

income up to £1,935 per annum, whichever is the less: 
Provided that if, having regard to his wife's length of service or to his needs, the trustees think fit, they may make a larger payment not exceeding £1,390 or such sum as, in the opinion of the trustees, will bring his income up to £2,605 per annum, whichever is the less.'.—[Sir Nigel Fisher.]

Orders of the Day — COMMONWEALTH YOUTH EXCHANGE

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Le Marchant.]

Mr. Alan Haselhurst: The occasion for this debate about Commonwealth youth exchange is the decision of the British Council to decline to make any grant to the Commonwealth Youth Exchange Council in 1980–81. That will bring all exchanges between young people from Britain and Commonwealth countries to an end.
The Commonwealth Youth Exchange Council, of which I have the honour to be chairman, was formed in 1970 as an educational charity. Its aims are to promote among young people a wider knowledge and understanding of the Commonwealth, to provide information and advice on contacts and exchanges between Britain and other Commonwealth countries, and to grant aid for such projects. The CYEC constantly stresses the need for young people to be fully briefed about the countries that they will visit and about the Commonwealth in general.
The activities of the council during the last nine years have led to firm contact being established with the youth ministries and other key agencies in nearly all Commonwealth countries with which one has to deal in order to arrange effective youth exchanges. The CYEC also liaises closely with Commonwealth high commissioners in London and British high commissioners overseas. The status of the CYEC as a "Government supported body" is very important, as it gives that body weight and helps it effectively to maintain its contacts.
In the current year we have supported 2,158 young people on 96 exchange projects. An increasing number of those exchanges involve developing countries.


Those countries are now given priority at the expense of previous substantial support for exchanges with Canada. The grants are merely a topping up, representing perhaps up to one-third of the total cost involved in an exchange. The amount is determined according to need.
We also try to ensure that any exchange that is grant-aided carries a substantial educational content. In 1970 it was felt right to set up a separate body to deal with youth exchange with the Commonwealth, in order to identify the special characteristics of the Commonwealth and implant them in the minds of Britain's young people. It was felt that a body dedicated to this task alone was essential if we were to encourage an idea of the developing Commonwealth in young people in Britain.
We believe that in nine years we have performed reasonably well, and we are anxious at present to pursue what I call the developmental role in Britain—the projectional role of getting across the idea of the Commonwealth to young people, encouraging them to get involved in exchanges with young people in Commonwealth countries. I believe that this is an extremely worthwhile exercise which should be expanded rather than be faced with contraction.
The substantial bulk of the funds for the Commonwealth Youth Exchange Council is provided from the Exchequer through the medium of the British Council. In the current year the level of funding was £79,080. In addition to that we receive approximately £5,500 from voluntary sources, and perhaps some additional small amounts from local authorities and other supportive agencies. I have probably said sufficient on the financial side to make it clear that the activities of the CYEC depend almost wholly on the grant that has been received through the British Council.
Early in October this year, in response to cuts that had to be made in public expenditure as a whole, the British Council found that it had to save some £5 million out of a budget of £46·6 million. Its response to this in part was to axe in total its grant to the CYEC.
I have the strongest possible objection to the manner in which the British Council conducted its operation. I thought that

we were living in a society in which consultation and participation were becoming more the orders of the day. But this was a peremptory decision conveyed in an almost brutal fashion by the British Council to the CYEC, and it has been received with shock and dismay not merely by those dedicated people who have given their time to the CYEC but also by the many agencies around the Commonwealth and by other voluntary agencies in this country.

Mr. David Hunt: I am grateful to my hon. Friend for giving way to me because it gives me an opportunity to stress to the Minister the widespread support that is felt amongst youth organisations for what my hon. Friend is saying. The British Youth Council, of which I have the honour to be president, deplores very strongly the British Council's decision and regards the work of the CYEC as being extremely important, if not vital. It should continue, and I hope that my hon. Friend will be successful in persuading the Minister to intervene and ensure that this work can go on.

Mr. Haselhurst: I am grateful to my hon. Friend the Member for Wirral (Mr. Hunt) for drawing attention to the support that there is from the British Youth Council and many other quarters, for which the CYEC is most grateful in these difficult days.
I find it extraordinary to see how the British Council has gone about this extremely difficult business. I have a great deal of sympathy for the Council and those who work for it, not only in this country but around the world. But I cannot help feeling that it was a somewhat easier decision for the Council to make to axe services in which it was not so much directly involved rather than those services in which it had its own employees. That may be a harsh judgment, but I am afraid that it shines through the manner in which the British Council dealt with this affair.
In response to my protests, I must acknowledge that the British Council has said that it could find for 1980–81, without any hope of repetition for the future, the sum of £15,000, which might help the CYEC to survive and try to re-establish itself with voluntary support. However, I question the defence that the British


Council has put forward to the manner of the cuts that it has made.
In a written answer on 22 November my hon. Friend the Under-Secretary of State for Foreign and Commonwealth Affairs replied to my hon. Friend the Member for Leek (Mr. Knox) with figures in respect of British Council grants for youth exchanges in 1980–81. It appears that a total sum of £341,500 is to be expended through the medium of the British Council on exchanges: to Eastern Europe £50,000; to France £77,590; to Germany £114,800; to Western Europe £99,110, and to the Commonwealth nil. That was prior to the decision to allow £15,000 as a once-and-for-all gesture to CYEC in 1980–81. I find that order of priorities staggering. I do not understand on what possible rational basis that allocation could have been made.
I am told by the British Council in defence of its actions that exchanges to Europe, East or West, are more cost-effective. That is because exchanges to Eastern and Western Europe are cheaper. Thus, more people can go for a given sum. That I understand, but that does not mean that it should be the basis upon which priorities for youth exchange should be assessed.
I argue that it is relatively easy—I did it in my student days—to cross the Channel to the Continent of Europe. It needs less expertise and less finance—I am not saying that it needs none of those commodities—to establish an effective exchange. However, if there is to be an exchange of young people with the Commonwealth, especially with developing countries, to which I think it is right to give emphasis, there needs to be careful organisation and contact. In other words, those who make the arrangements have to be experts. The aim of CYEC is to provide expertise and to help young people, whose horizons stretch rather further than Western or Eastern Europe, to participate in effective exchange. I find the British Council's answer extraordinary.
The Council also claims that by reducing the grant to CYEC virtually to nil it can save extra costs within its organisation. I am curious to know how those savings may be achieved. I shall explain the system. The vast proportion of the grant that is now made to CYEC

is used for exchanges. In addition, there is an administration grant, which is paid directly to CYEC. The rest of the money is held by the British Council. The CYEC determines which applicants shall receive support. The names are sent to the British Council and processed through the computer. Cheques are received by CYEC. All the paper work for the participants is processed by CYEC.
The staff of CYEC consists of one executive secretary full time and a full-time assistant who works in a secretarial capacity. It could perfectly well take on the work which the British Council has been undertaking. I see no reason why the grant for exchanges should not be paid directly to CYEC and handled by it without any increase in its staff, and presumably with some saving to the British Council. That would overcome one of the difficulties that the British Council has raised. If all that the Council is trying to do is save money, I can save money for it, because the devoted and loyal staff of CYEC will undertake all the work and will do so extremely efficiently. If that were allowed to take place, the operation could continue.
I have three points to make. First, if we are to spend £341,500 on youth exchanges, it cannot accord with the priorities of Her Majesty's Government, or Britain generally, to spend nil on Commonwealth youth exchanges.
Secondly, I am prepared to be open-minded about the need for some rationalisation of youth exchanges. It may be that we need a new form of organisation exclusively to handle youth exchanges involving Britain's interests. If we had an organisation that was exclusively concerned with exchanges involving young people, I am sure that we could introduce an order of priorities different from that which the British Council has achieved, which seems scandalously to neglect our traditional interests in Commonwealth countries.
I hope that my hon. Friend the Minister will consider the fact that various moneys are expended by Government Departments—not only his own—which go through various channels into the business of youth exchange. Perhaps there is a better way in which we could handle these in the interests of the country, of efficiency and of having the widest possible spread.
Thirdly, looking at these figures, if we are to save something for the Commonwealth Youth Exchange Council, is it all that unreasonable to ask that £5,000 might be shaded off exchanges with Eastern Europe? Are exchanges with Eastern Europe more important to us than exchanges with the Commonwealth—more important to the tune that there should be no money for the Commonwealth yet £50,000 should be spent on Eastern Europe? Might not £5,000 be shaded off the figure for exchanges with France, which, in any case, in money terms, is scheduled to rise between 1979–80 and 1980–81? Might not £5,000 be shaded off the amount for Germany, which is scheduled to rise from £104,600 to £114,800? Might not £5,000 be shaded off the total for Western Europe, which is scheduled to rise in money terms from £90,410 to £99,110? Would not that £20,000, together with the £15,000 that has been offered by the British Council as a latter-day gesture, together make up at least a kernel of an amount upon which the CYEC could survive in future? Even that would represent a 50 per cent. cut.
I accept that even in these difficult times we must all accept cuts. However, it is a question whether these cuts are reasonable and whether they are fairly distributed in the particular environment in which they are being considered. As it is, the CYEC must take the begging bowl around private industry. It will do its best. It will redouble its efforts to raise money to continue work which we believe to be important and valuable. But it will be a sad day indeed if the Government put their imprimatur of approval on the work done by the British Council, which will effectively reduce the CYEC to a shell and ensure that the very minimum is done in the future to develop the contacts of young people in this country with young people in the Commonwealth. I think that such an answer will be widely regretted not only in the House, not only in the country, but throughout the Commonwealth.

The Minister of State, Foreign and Commonwealth Office (Mr. Peter Blaker): In raising this Adjournment debate my hon. Friend the Member for Saffron Walden (Mr. Haselhurst) has brought to the attention of the House two important areas that are of concern to the Govern-

ment—the Commonwealth, and youth exchanges.
I must make clear from the start that neither the Foreign and Commonwealth Office nor, I believe, the British Council wishes to see the demise of the Commonwealth Youth Exchange Council. The CYEC has performed a valuable task over the years in promoting and fostering exchanges between the United Kingdom and Commonwealth countries. I note the support that my hon. Friend the Member for Wirral (Mr. Hunt) also gave to what it has done.
The British Council's decision to end the grant was taken because of the overriding need to reduce Government expenditure. My hon. Friend will know that for 1980–81 the British Council is having to reduce its spending by about £5 million. This is a regrettable necessity. My hon. Friend also knows that the Council is not alone in having to accept a cut of that severity. Because of the spending plans that the Government inherited, and because those spending plans were based on assumptions about economic growth that have proved wholly unrealistic, some very painful decisions have had to be taken in a number of fields. The Government decided—and, I am sure, rightly decided—that the British Council could not be exempt from making its contribution.
Though the Foreign and Commonwealth Office is answerable for the British Council in the House, it does not dictate to the Council how it should run its day-to-day activities. The Council is an independent body, incorporated by Royal charter. The rule of the Foreign and Commonwealth Office is to give it broad guidelines on geographic priorities. In connection with the cuts for 1980–81, the Foreign and Commonwealth Office advised the Council that it should, where possible, try to avoid closing down its posts abroad. That being so, home-based activities have had to bear a proportionately higher share of the cuts than overseas activities. One of the home-based activities, according to the British Council's organisation, is youth exchanges.
The responsibility for deciding originally to cut the Commonwealth youth exchange programme completely, to reduce the East European programme and to maintain spending on the programmes to Western Europe, was that of the British


Council. Perhaps it will help my hon. Friend if I explain its reasoning as it has explained it to me.
If staff savings were to be made and other programmes maintained at a viable level, the British Council considered it necessary to cut out an entire programme and drastically to reduce another, thereby trimming its administrative costs.
The Council looked at the economics of the different programmes. France, Germany and Western Europe as a whole were the least expensive programmes run by the Council in terms of the numbers exchanged. In 1978–79 the average grant per head to France was £13, to Germany £12 and to Western Europe generally £16. For the Commonwealth and Eastern Europe the figures were £43 and £82 respectively.
For £80,000 the Commonwealth programme grant-aided 1,700 young people, whilst for about £120,000 some 10,000 young people were assisted in exchanges with Germany. The Eastern European programme is also less cost-effective than those to Western Europe in these terms, but we have cultural agreements with many Eastern European countries where specific references to youth exchanges are made. The British Council, in reducing its Eastern European programme, will fund the less expensive exchanges, and it may be that future cultural agreements can have less emphasis placed on these exchanges. We shall be examining this point, subject to our commitments, bearing in mind the Helsinki agreement.
In addition, successive Governments have concluded a number of cultural agreements with Western European countries, including France and Germany. These countries attach great importance to official support for youth exchanges—an interest to which Her Majesty's Government respond.
We have an official special committee on youth exchanges with Germany. The committee meets annually to discuss the programme for the following year and looks at ways in which we can improve on the exchanges. A further group meets regularly with the French. There are less frequent but important contacts with the Netherlands, Italy, Belgium and Spain.
These were the reasons why the British Council decided that the Commonwealth

youth exchange programme should be dropped and the money for exchanges with Eastern Europe substantially reduced. They were the most expensive per head to finance. In addition, the Council calculated that by this course it could economise to the extent of one member of its staff.

Mr. Haselhurst: I should be interested to know who that member of staff is. I have attempted to work it out on the basis of the relationship between the CYEC and the British Council, but what that saving will be defeats me.

Mr. Blaker: I cannot identify the individual at the moment, but I am giving the House the explanation that was given to me in my discussion with the British Council.
The Council also took account of the fact that there were other funds and organisations that encouraged exchanges and other forms of co-operation with the Commonwealth. For example, under the Commonwealth youth programme, assistance is provided to regional centres in India, Africa and Caribbean countries to assist in the training of youth leaders and to set up workshops to consider other youth problems in the Commonwealth.
Her Majesty's Government meet 30 per cent. of the cost of the youth programme. We also provide broad assistance to the Commonwealth through the aid programme in education and give help to a large programme for Commonwealth scholars, since it is in the educational and developmental areas that the needs of the Commonwealth are best served. The Council also took account of the fact that exchange is a two-way process and that there are many difficulties in establishing truly reciprocal contacts with developing Commonwealth countries. Very often those countries do not have the machinery to support exchanges at their end.
The CYEC has for many years concentrated at least 50 per cent. of its efforts on Canada. There are, of course, obvious reasons for this. Canada is a good friend, it has a strong administrative structure for its youth movements, and it can provide many contacts for identifiable British youth groups—for example, young farmers and the boy scouts. But the CYEC has, so far, not been able to


develop exchanges with Commonwealth countries to anything like the same extent as it has with Canada.
I have listened carefully to the points made by my hon. Friend in the House today and previously in the discussions I have had with him. I have been impressed by his arguments on behalf of continued Commonwealth youth exchanges. I am particularly impressed by the argument that Europe is nearby and that exchanges with it are relatively cheap and easy to arrange. Commonwealth countries, on the other hand, are mostly far away and more expertise and effort are needed to develop exchanges with them.
As a result of my discussions with my hon. Friend, I have asked the British Council to review its decision in the hope that it can continue making a grant to the CYEC for the coming year. My hon. Friend knows—indeed, he told the House this evening—that a little while ago the Council indicated that it could find £15,000. However, I understand that this would have done little more than allow the CYEC to keep its own machinery ticking over and would not have allowed it to make any grants. As a result of a conversation I have had with the British Council more recently, I can now tell my hon. Friend that the Council informs me that it will reconsider the position and hopes to be able to do a good deal better than the £15,000 I have just mentioned and provide a sum which will enable the CYEC to give grants in the coming year, though not up to the level of the recent past. The Council will, of course, need time to work out the details.
I feel sure my hon. Friend will welcome this news. I hope that he and the CYEC will bear in mind the comments on their programme that I have just mentioned. I hope also that the CYEC will pursue energetically the search for non-governmental funds. The Council had planned, as a consequence of cutting the CYEC grant, to save one member of its exchanges department staff from its total of seven. Now that the British Council is prepared to offer further assistance, I hope that the CYEC can take all possible steps, in co-operation with the British Council, to reduce the adminis-

trative burden on the Council so that such a saving can still be effected. I should add that the arrangements that I have mentioned will apply only for 1980–81. What happens after that will be considered later.
I recognise that there will still be a shortfall in the CYEC's budget for 1980–81 compared with this year. Nevertheless, our youth exchange assistance is only a "topping-up" process, as my hon. Friend said. The young people must pay a proportion of the cost themselves. Other money is already contributed by private sources, through fund raising, and some is provided by local authorities. If other sources of funds can be identified, and the expertise of CYEC in advice and development can be enlarged upon, I am confident that many of the exchanges mentioned by my hon. Friend can be continued.
My hon. Friend called for a rationalisation of youth exchanges. We know that many organisations exist to foster and encourage these exchanges, but many of them are independent bodies with their own constitutions and they reflect the United Kingdom's pluralistic approach to youth exchanges. We do not wish to impose programmes from the top but prefer to respond to identifiable needs. The British Council supervises its exchange activities through a consultative committee based on youth workers, voluntary bodies, local authorities and representatives of central Government.
That committee, although invited recently to comment on the future of youth exchanges, did not recommend that any rationalisation was required. We would, however, be pleased to respond to my hon. Friend's proposal, and I shall instruct my officials to arrange a meeting with the Department of Education and Science and to explore the possibilities. I hope that my hon. Friend can take comfort from the offers that I have made and that the CYEC can continue and expand its role as an adviser and organiser to help young people and their organisations to find contacts and increase their knowledge of the Commonwealth.

Question put and agreed to.

Adjourned accordingly at twenty minutes to Ten o'clock.